To address the dollar exchange rate... Mazhar Muhammad explains the risks of floating the Iraqi dina

POSTED ON[You must be registered and logged in to see this link.] BY [You must be registered and logged in to see this link.]

[size=52]To address the dollar exchange rate... Mazhar Muhammad explains the risks of floating the Iraqi dinar[/size]

[size=45]To address the dollar exchange rate... Mazhar Muhammad explains to Al-Zawraa the dangers of floating the Iraqi dinar
[You must be registered and logged in to see this image.]
04/27/2024
Mustafa Falih:
The government’s financial advisor, Mazhar Muhammad Saleh, explained the dangers of the economic vision that wants to float the Iraqi dinar as a solution to address the double dollar exchange rate, while Provide an alternative economic vision.
Saleh said in an interview with “Al-Zawraa”: “The economic vision that wants to float the Iraqi dinar to end the gap between the official rate and the exchange rate parallel to it may be possible in an economy in which the free market is the only one influencing the movement of the balance of payments and not in an economy in which the government sector is dominant and rentier-generating.” Reserves supporting foreign currency, in which the monetary authority is the main source of supply of foreign currency and meeting the desired demand for foreign exchange.”
He added, “Claims (for floating) mean in all cases adopting the prevailing exchange rate in the parallel market to achieve the goal of stability and balance in the official exchange rate itself at a new exchange point that the market will reach at the end of the supposed floating policy and return to stability again.”
He pointed out that “the scenario of demands for floating means, in all cases, the withdrawal of the monetary authority (as a primary central exhibitor) of foreign currency, and is replaced by new forces that exhibit foreign currency from free market makers, which certainly only have a weak, limited supply of foreign exchange, and at the same time they carry... An uncontrolled bundle of inflationary expectations is called the forces generating inflationary expectations.”
He explained that “the new hypothetical supply forces for foreign exchange adopted by the exchange market in that scenario will mean the dominance of supply forces from speculators with very limited quantities of foreign exchange available for supply in the parallel market, matched by an open demand for foreign currency on the part of the market that undoubtedly exceeds that limited parallel supply.” of foreign exchange, perhaps at least more than ten times.”
He stressed that “such a policy of floating to achieve a homogeneous equilibrium exchange rate will be an open and perhaps (unruly) situation as long as the central government supply of foreign currency will be absent from the market, and we will not then obtain any equilibrium point in the exchange rate that the float seeks except with a widespread deterioration of the exchange rate as long as It is controlled by forces that generate inflationary expectations, and it is an exchange rate whose mechanisms will move in a market that is incomplete in terms of productivity to compensate for the required supply of goods and services,” adding, “Then no one knows how much the new price resulting from (floating) will be, which will undoubtedly be accompanied by a prior wave of expectations.” Inflation is a dangerous wave whose trends are difficult to control, which may force monetary policy to intervene with excessive foreign reserves and unjustified extravagance in foreign exchange to impose a state of stability in the general level of prices.”
He noted that “the difference in the two prices did not come due to the limited supply of foreign exchange at the monetary authority, but rather came as a result of a sudden external factor imposed by the compliance platform and administrative audit restrictions on external transfer movements.”
He explained that “the alternative solution to the flotation scenario, which is a scene surrounded by inflationary risks in mono-economy countries, is to resort to reducing the exchange rate to create harmony in the exchange market. It is possible to go to amending the customs tax schedules and imposing customs discipline with precise, studied conditions that protect the national economy, and here it depends.” To financial policy instead of the ease of delving into and risking the principles of stability in monetary policy to provide the required price homogeneity in exchange rates.”
He pointed out, “The high operating spending in the annual public budgets, which has always generated cash income from rentier sources that are not matched by the very limited productivity of commodity and service flows, has made the country essentially dependent on large-scale imported consumer goods, which requires a higher examination in Import policies inherited over the past twenty years.”[/size]
[size=45][You must be registered and logged in to see this link.]