Central Bank and the waste of public money By: d. Sinan Shabibi Mohammad Reza * former central bank

Central Bank and the waste of public money By: d. Sinan Shabibi Mohammad Reza * former central bank governor -



05/18/2013 - 5:35 pm



By: d. Sinan Shabibi Mohammad Reza * former central bank governor
Raised a lot of talk about the foreign currency auction hosted by the central bank that it involves a waste of public money, and I would like to make a few ideas on this subject.



1) There is no wastage of public money as a result of the auction process, فالمصارف submit Bdnanerha to the central bank and are converted into dollars using the foreign currency reserves, according to the exchange rate advertised, and therefore we have a process of exchange and swap purely monetary. In other words, we do not give a dollar for free, and thus we do not Nhdrh. The central bank paid 13 dinars for each dollar the converting. Central Bank is wasting public money if the dollar gave free as we mentioned or be dinar dollar swap preferential exchange rates.
It is also said that the central bank is wasting public money because it sells large quantities of the dollar.


But the sale of these quantities is a response to the request of buyers who represent commercial banks. It is very important to be meet all the demand for the dollar after the audit is put the bank in terms of banking irregularities, and after that the bank has submitted quotes that his request had been subjected to audit the Office of money laundering at the bank. The interview each application is essential in monetary policy, but the demand which is not to meet him and إشباعه by the central bank will go to the market to satisfy his need to the dollar from another source, which will create the exchange rate last necessarily be higher than the central bank rate, and therefore we will be in front of the phenomenon multiple exchange rates at the central bank and the local market.



That سيخالف Central Bank Law (Article 3) and will hinder the economic decision-making and distorts the price level. The criteria for the International Monetary Fund, which Iraq is the first signatories to the Convention of saying that the difference between the two rates (the central bank rate and the market price) must not exceed 2%. At the present time, and under the new management, the difference between the two rates of nearly 8%.



When the dollar bank sells it exercised monetary policy and not a commercial operation, Fbabie dollar pulls the dinar from circulation and relieve inflationary effects (the first goal of the central bank), which works on the rationalization of expenditure in general and lead to reduce wastage of public money.



The change in the exchange rate is not a waste of public money, and to satisfy the demand for the dollar is also not considered a waste of public money, and must be equal to the supply and demand to stabilize the price (the first goal of the central bank, as mentioned). This market operations and our economy is an economy in transition to a market economy, and such openness is accompanied by fluctuations in supply and demand certainly affect the movement of cash. The important thing is that the market situation is returned to the state of stability.



I just mentioned that the difference between the exchange rate of the central bank and the market price under the current administration is about 8%. Bank did not indicate the reason for this difference, and we believe that the reason is economic sense to the failure of the bank to meet all demand, which leads to this disparity between the central bank rate and the market price, and this is contrary to Article III of the Law of the Central Bank. This disparity must be addressed (note that it is on the rise), has faced the old administration some disruption and volatility in the exchange rate in early 2012 as a result of strong demand for the dollar due to the U.S. withdrawal at the end of 2011 and regional circumstances, other than that the administration was able to restore stability in the third week of the month of September 2012, where the price of 1196 dinars to the dollar.



Deduce if it according to the principles and the law of the central bank there is not a waste of public money, Firstly, the central bank sold dollars to meet the dinar, and secondly that the bank in his work that meets the demand for the dollar and maintains the stability of the exchange rate and domestic prices and provides a suitable environment to maintain public money and use it frequently used product, which promotes sustainable development and contribute to job creation, as shown in the article (3) of the Central Bank Act.



2) the central bank sells dollars to banks and sells to its customers for use in the importation of goods and services, and this is a business process and not a process which get cash out of the central bank, to come out after the dollar from the central bank. Therefore, this business process is not related to the central bank, but is related to uses different to the private sector that could be used dollar for medical purposes and tourism, or to buy some assets or may resort holder dollar to the so-called savings external causes of economic, security and political anticipation of improved conditions and investment environment even bring this savings in whole or in part to Iraq.
This means that the central bank should not be blamed if the import increased by a few of the amount granted, the central bank should not be held accountable for a business process. It is possible that the central bank held accountable if there is a defect in the exchange rate of the dollar against the dinar, ie the monetary process. The waste of public money as a result of a business process in spite of its importance does not fall within the work of the central bank.



3) The Central Bank shall provide a copy of the requests submitted to the conversion of the auction committee to the Department of combating money laundering and terrorist financing in the bank for detailed follow-up (which includes follow-up operations dubious) in spite of the bank concerned to give us the martyrdom about its operations free of money laundering.


If this circuit is that it must essentially be diagnosed and sequence of money laundering and financing of terrorism inside and outside Iraq can (according to the Money Laundering Act of 2004) to do so directly without reference to conservatism Bank, Vdaúrh money laundering retain the independence of its operations.


These subsequent follow-up, which is very important, do not obstruct determine the exchange rate and price stability in general. We have to remember, as we noted earlier, the domestic price stability is the first objective of the Central Bank in accordance with Article 3 of the Law on the Central Bank.


The auction committees receive a citation from the banks about the absence of money-laundering operations, but that should not impede the smooth flow of financial flows and exchange rate stability. The Department of money laundering, which received a copy of the auction requests directly is that you should scrutinize flows in terms of money laundering in detail.



It can be summed up what Ordnah in points (2) and (3) that the fate of foreign currency Badelha the central bank to meet the Iraqi dinar in the auction process, which ends its mission here, is to go through the commercial banks to finance the various types of imported goods and services and other purposes that we mentioned earlier. All requests for this conversion is given to money laundering department must follow up and determine the fate of foreign currency, especially suspicious ones and tell the security agencies directly.



4) It is important to show that there is no restriction in the current transfers of payments in accordance with Article VIII of the Convention on the International Monetary Fund, which Iraq was one of the first founders and first signatories to the Convention of 12.27.1945. In addition, the freedom in remittances guaranteed notes of the financial and economic policies with the



International Monetary Fund, which has been held and signed by the Minister of Finance and the Governor of the Central Bank. We would like to make it clear also that all restrictions have been removed, especially after the abolition of the Directorate of foreign exchange at the central bank in 2003.

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