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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    The crisis of the rise in the dollar exchange rate between the weak establishment of a fixed exchang

    rocky
    rocky
    rocky
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    • Post n°1

    The crisis of the rise in the dollar exchange rate between the weak establishment of a fixed exchang Empty The crisis of the rise in the dollar exchange rate between the weak establishment of a fixed exchang

    Post by rocky Mon 30 Jan 2023, 5:48 am

    The crisis of the rise in the dollar exchange rate between the weak establishment of a fixed exchange rate system and the application of federal procedures

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    Dr.. Haitham Hamid Mutlaq Al-Mansour
     After the significant rise in the exchange rate of the dollar against the dinar since the end of last year until recently, the Iraqi economy is suffering from a significant decline in the value of the Iraqi dinar against the dollar, and a rise in the prices of foodstuffs and commodities, as a result of the recent fluctuation shock in the exchange rate of the dollar against the dinar in the parallel market, on the Despite the Central Bank’s announcement of selling at the official price of 1460 dinars per dollar, and that the price rise is an accidental and not substantial result, and it will disappear with the alignment of the banking system’s movement with the requirements of the Fed’s strict policy towards import banking activity.
    The continuation of the rapid rise of the dollar exchange rate in the parallel market in less than two months and its rapid movement through several thresholds, reaching the threshold of 1680 dinars per dollar, shows that the dollar exchange rate suffers at an unprecedented rate of great fluctuation as a result of the high domestic demand for it against the dinar, which is a result of The decrease in the flexibility of the dollar supply in the foreign currency sale window of the Central Bank of Iraq due to the application of the American Federal Bank’s procedures for auditing dollar transfers through the new platform of the Central Bank, which played a major role in reducing the volume of central sales of dollars, which caused a decrease in the effectiveness of the window to maintain the actual exchange rate within the target.
    Therefore, in light of the low ability of the fixed exchange rate system to establish the target exchange rate, the dinar is in a real crisis, due to the erosion of its real value, which reveals to us the weak performance of the economic decision-maker towards the international variable, for many reasons that cannot be mentioned, and therefore the weak ability of The monetary authority’s tools to absorb the shock of dollar demand and maintain the actual exchange rate rates within or close to the target, contributed to deepening the gap between the effectiveness of monetary policy tools and the requirements of strict measures from the international SWIFT system towards the movement of the import dollar and its subjection to audit restrictions, the repercussions of which appeared through new increases in The actual dollar exchange rate.
    This was quickly reflected in the level of the food and consumer price index towards an increase and recording signs of economic recession, which puts the government in front of a major test, especially since it announced its intention soon to reduce the exchange rate of the dollar against the dinar. In addition, the great fluctuation in the exchange rate of the dollar plays a negative role on the stability of the Iraqi economy in all parts of the aggregate activity, especially the aggregate demand in both its consumer and investment parts, and at the public and private levels.
            From the foregoing, the ineffectiveness of macro policy measures in facing the shock of the dollar’s ​​rise can be seen through two essential axes:
    The first axis is short-term and related to monetary and fiscal policy through:
    Compensating for the low flexibility of the window supply of the dollar through innovative mechanisms to reduce the demand for it in the parallel market.
    Containing what is possible from the phenomenon of money laundering in banking activity, in a way that reduces the exaggeration of foreign transfers.
    Coordination between government policy and monetary policy to unify the overall effort towards achieving the target exchange rate through rationalizing government spending and then tightening control over the monetary mass and trying to compress it within the horizon of the general objective of macroeconomic policy.
     Carrying out real reforms in the financial and monetary sector to raise the flexibility of banking performance according to the SWIFT system.
    Move politically and diplomatically towards conducting real negotiations between the Iraqi government and the American side to prevent the crisis from consolidating and try to dismantle it with effective negotiating ability to obtain exceptions from the federal government or reach solutions or provide guarantees that give more flexibility by granting some exemptions from some controls or providing facilities in order to strengthen the system Fixed exchange.
    The second axis is long-term: it relates to economic reform policies in the macroeconomic structure and an attempt to get out of the rentier sin by compensating for the acute shortage in public and private investment by following internal investment policies based on the development of the real sector to diversify the sources of total income, including the decrease in import demand for the dollar for consumption purposes in exchange for growth The demand for the dollar for investment purposes, which in turn can raise the growth of internal capital accumulation to formulate an industrial policy and a trade policy aimed at raising the value of the non-oil GDP through policies that attract foreign investment to supply the internal investment movement with the basic requirements for the growth of the non-oil productive sector.
    Therefore, the Iraqi government must face this crisis objectively, seriously, and as quickly as possible, because of this crisis's great effects on the level of social well-being for many segments of society that are directly affected by inflation, and because it represents a real indicator of the performance and effectiveness of the country's macroeconomic policy and its reflection in The balance and stability of the financial and monetary market and its direct impact on the map of investment and financing for local and foreign companies in many real productive and service sectors.

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    Added 01/30/2023 - 9:29 AM
    Updated 01/30/2023 - 2:42 PM
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