taxguy

1. You are right that the CBI's website is no help at all. The CBI currency auctions involve two parts, the "cash" portion and the 'transfers out" portion. The main page for the currency auctions does not show the break out between the two parts but you can see it by following the "exchange rate" link at the bottom of the page. The cash portion involves the exchange of physical dinar by the banks for their own account or for their customers (only banks can participate) for US dollars from the CBI. The transfers out portion of the auction involves primarily international payments in dollars by the CBI for the participating banks or their customers. These transactions are necessary to allow Iraq to import goods and services because the IQD cannot be used for international transactions. The auctions ALWAYS involve the CBI selling USD to the participating banks in exchange for IQD. The CBI does not sell dinar at the auctions. I was confused about the auctions because it is impossible to tell from the CBI's website which way the transactions are going. However, was able to get set straight by posing the question to a very high ranking Iraqi government economist, who told me that the CBI is selling dollars for IQD. When you think about it, it makes sense, too. The Iraqi government, of which the CBI is a part, has tremendous dollar revenues from oil sales and the Iraqi people and businesses get paid in IQD. 2. I don't know of any central bank that "redistributes" currency. I don't know but would think that Iraqi banks can probably buy dinar from the CBI at the exchange rate established at the auctions. 3. Every year the CBI puts a notice on its site asking for bids to assist with the destruction of worn out currency. I think the CBI has unissued currency that banks can purchase at the exchange rate set at the auctions. CBI doesn't have replace retired currency - the market takes care of that. 4. I don't know of any reason why they would destroy non-damaged other currency.that they have in their possession. Maybe others have ideas on this subject. 5. The auctions do reduce the amount of physical dinar in circulation. Obviously, the less dinar in circulation and the more dinar in vaults of the CBI, the easier it is to cover the RV rate. I hope that helps and if anyone else has other ideas or thoughts, please share them.

A few months ago I attended a talk given by the chief economist for one of the largest banks in world. This guy is responsible for investment decisions regarding hundreds of billions of dollars worth of client portfolios. I asked him about Iraq and he replied that Iraq could be an economic power house but that it could also end up as a basket case, too early to tell because of the instability in the government and the region. I asked him if the US Treasury held dinar and told me, no, that the US Treasury does not hold dinar beyond what it needs for operational purposes, such has the US Embassy in Baghdad.

This is an interesting article, but it seems to say that Maliki is appointing this guy to serve as Defense Minister until the blocs agree on a final candidate. Remember that Maliki is currently serving as defense minister by proxy. I don't think this article means that we have a final resolution to this issue

You are right, my mistake. I meant to say that the CBI is always buying dinar at the auctions. Its buying dinar / selling dollars. I got it backwards. Sorry!

Some answers to your questions: 1) Yes. At the auctions, the CBI is always selling IQD and buying dollars at the official exchange rate. This is how the CBI has been able to maintain a stable rate for the past few years. 2) The CBI said that the low auction volume last week was due to newly imposed requirements that the banks participating in the auction provide tax information about their customers for whom the banks were buying dollars. This primarily impacted the "transfers out" portion of the auction, where the CBI is basically selling foreign remittances - converting dollars to IQD and then transferring the dollars out of Iraq. It seems that the imposition of this requirement caused the banks and their customers to pause and not participate in the "transfers out" portion of the auctions last week. As the IQD can't be used for international transactions, this part of the auction is vital to Iraq to be able to import needed goods and services. 3) The CBI never sells dinar at the auctions. The CBI is always selling dollars at the auction. The Iraqi government has lots of dollars from oil revenues, which are always paid in dollars. I had this confirmed by a top Iraqi government economist, who meets with Shabibi and the minister of finance and is in a position to know this. 4) Based on the answer to number 3, the answer to this question is "no." i hope this helps.

It's a little more complicated than that, IMO. CBI uses to auctions to control the exchange rate. That is, if the CBI will buy dinar at 1170 to the dollar, the rate can't go below that. It also happens that because the IQD is not a recognized international currency so that banks and their customers need to use the transfers out portion of the auction to facilitate international transactions. You are correct that the because the CBI is drawing CBI at the auctions, as opposed to putting more iQD into circulation, it facilitates rather than impedes the RV. Also, the very small cash auctions (as a percentage of the total auction volume) would seem to indicate that Iraq Banks and their customers want to hold onto their dinar. this is what we would expect if they were expecting its value to increase. That's what I like about watching the auctions - its real banks and their customers giving us an indication, with how they hold their money, of what they think is going on. Who would know more about what is going on, you and me or the Iraqi Banks and their customers?

guys I just realized that I said "IQD" when I meant "USD" in the last sentence of my post. I put USD in bold below where I replaced IQD. Sorry for any confusion. The buy rate is always 1168 and the sell rate is always 1170. The sell rate, which is the higher number, 1170, is actually the lower rate because it means that you need more IQD to get one dollar. It would not make sense for the CBI sell IQD for less than they than they buy them. This would be a money making machine for the banks. It would have to be the reverse, the "buy" rate has to be lower than the "sell" rate, just like any currency changer. What this means is the rates they show are given in terms of the purchaser, not the CBI. In other words, the CBI auction results quote the prices from the perspective of the auction participants, the banks. IQD 1170 is the rate at which the participating banks are purchasing USD at the auction. If we saw an auction at which the price was 1168, then we would know that CBI was selling IQD.

You guys are very welcome and Doc thank you for sharing your insights.

NotMyFirstBBQ I agree with you that this is confusing. The stuff you quote above is the reason why I originally thought that the CBI was selling IQD at the auctions. But I was set straight by an old Dinar investor and then was able to confirmed this information with a very senior Iraq govt economist. With the information confirmed, I was able to make sense of the CBI website as follows. If you go to the home page, you will see to rates quoted for USD in IQD, the "buy" rate and the "sell" rate: http://www.cbi.iq/index.php?pid=Home The buy rate is always 1168 and the sell rate is always 1170. The sell rate, which is the higher number, 1170, is actually the lower rate because it means that you need more IQD to get one dollar. It would not make sense for the CBI sell IQD for less than they than they buy them. This would be a money making machine for the banks. It would have to be the reverse, the "buy" rate has to be lower than the "sell" rate, just like any currency changer. What this means is the rates they show are given in terms of the purchaser, not the CBI. In other words, the CBI auction results quote the prices from the perspective of the auction participants, the banks. IQD 1170 is the rate at which the participating banks are purchasing IQD at the auction. If we saw an auction at which the price was 1168, then we would know that CBI was selling IQD. I hope this helps. Take care!

You guys are very welcome. It is truly impossible to tell from the CBI website what is happening with these auction , whether they are selling IQD or USD. I originally thought they were selling IQD. An old timer told me it was USD and then I had that confirmed by a senior Iraqi goby economist.

At the auctions, the CBI is selling USD and buying IQD. There are two components to the auction, the cash portion and transfers out. The cash portion is exactly as it sounds, dinar currency for USD. The transfers out portion involves conversion of electronic funds (e.g., IQD bank account funds to USD) to enable Iraqis to purchase or good or services in USD outside of Iraq. The IQD is not accepted for purchases outside of Iraq. People get paid in IQD and government agencies get their budget in IQD. Any Iraqi that has IQD and wants to import something must convert their IQD to a currency that is accepted internationally, such as the USD. They would do this conversion through their bank and one of the ways that their bank would accommodate them is through the CBI auction. Conversely, the CBI, as an arm of the GOI, has lots of USD from the oil revenues that Iraq generates. As an aside, if you like to read some of the gurus' chats (as I do), you may be a bit confused here because some seem to think that the CBI is selling IQD at these auctions, thereby increasing the amount of IQD in circulation that has to be supported when the RV occurs. In fact, the gurus have this backwards, the CBI auctions actually reduce the amount of IQD notes in circulation. I have confirmed this with an senior Iraq economist. Now, with that background, here, IMO, is why they are still running auctions. First, the currency auctions are one of the ways the CBI maintains the exchange rate. If the CBI did not run the auctions, it would not have control over the exchange rate. Second, the auctions help to facilitate import transactions. Third, the auctions help the CBI bring in the large denomination notes. I think that the transfers out portion of the auction has to continue to allow for the Iraqi commerce to continue. With respect to the cash auctions, I don't know why people would want to exchange IQD for dollars at this point. Maybe the banks have to accommodate some customers that need USD to travel overseas. But I would expect that the cash portion of the auction would slow to a trickle, which it has. It currently runs at less than 2% of total auction volume. Cash auction volume has been running at $300,000 to $2.5 million out of a total volume in the range $120 to 160+ million. There was a stretch of several weeks not to long ago in which the cash portion of the auction was zero. To provide some context,iIn some earlier auctions, cash volume was $50 million plus, with regular cash auctions of $5 to 10 million. If the Iraqi banks and their customers were expecting an RV, they would want to hold onto their IQD and the result would be that the cash auction would slow to a trickle. This is exactly what we are seeing. So, IMO, the auction results are very encouraging.

Iraqi reveal dialogues to participate in the Maliki government 16/10/2010 Baghdad, October 16 / October (Rn) - The Iraqi List led by former Prime Minister Iyad Allawi on Saturday, for intensive dialogue with all political blocs in order to address file to form the government, according to new scenarios, stressing that it would participate in the government based on the principle of truth-making political decision. The leading figure in the list Izz al-Din State in an interview with Kurdistan News Agency (Rn) that "Iraq today is working to address the file to form a government with other political blocs" .. He expressed his belief that "the withdrawal from the government and the political process would not serve the public of Iraq." He said the State that "Iraq Uploaded logo change and is moving in this framework by addressing the file to form a government, although Iraq is the biggest bloc but has been described by some as" .. "noting that" if Iraq accepted to other to form a government must have a role an active role in political decision-making. " He said the Iraqi leader that "the list and a number of other lists of winning the election have bitter experience with the government's performance over the past years, and will not accept Iraq to be a source of resolution, however, one person during the next stage." He continued that "the dispute that is taking place on the definition of the concept of partnership, Vaerakip does not believe in the concept of partnership included access to some of the ministries and to carry out its ministers Maimly you from one person, but to be active all decision-making." He said the State that "the National Coalition close to the Iraqi proposals, and new scenarios will be discussed to create a convergence of the file in order to address the formation of the government." The National Alliance, called his post on the first of this month, the absence of the Supreme Islamic Council and the Islamic Virtue Party, Nuri al-Maliki's candidate for prime minister, and began the National Alliance to form a mini-committees to handle negotiations with the political blocs of winning the election to accelerate the formation of the government. In the view of Iraq as the biggest bloc that must be charged with forming a government building to achieve the highest votes in the elections held on 7 March last, in the view of state law that the Federal Court's interpretation of the constitutional article gave the right to block the biggest after the formation of the coalition government. The Iraqi announced after its emergency meeting held in Baghdad on the eve of Maliki's nomination for prime minister on refusal to participate in a government headed by al-Maliki, also announced its cohesion, and its insistence on adherence to its project of national and change, and promised all attempts to take over the government and method of formation of illegal and will not recognize it will not deal with their consequences. Iraqi and began negotiations with the quick and the Supreme Council of Islamic Virtue Party and the Kurdistan Alliance, a coalition to form a four-lead to the formation of the government and the failure of the national coalition effort which was nominated al-Maliki for prime minister to form a government. A spokesman for the Iraqi Haider Mulla has revealed a number of local media, on Tuesday announced the completion of the formation of a new bloc includes (130) members to form the next government include, the Supreme Islamic Council, and the Virtue Party and the Alliance of the center of Iraq in addition to the Iraqi List, which Maqhobl denied the majority of parties to the new bloc. For his part, announced a coalition Kurdish blocs in the earlier it will identify the biggest bloc, which will authorize the formation of the government despite the nomination of the National Alliance for the owners to the post of prime minister, and showed that the coalition of Kurdish blocs, which has (57) seats out of (325) will announce Ondhamh any block undertake agents to his paper, negotiating . http://translate.google.com/translate?js=y&prev=_t&hl=en&ie=UTF-8&layout=1&eotf=1&u=www.akhbaar.org&sl=ar&tl=en

I would cash in all I have at .86 and never look back.

Maybe the MAN is the cook at the local diner and he's confirming the price of the Sunday eggs and bacon special.

I heard the tail end of this call and it is as described, except that the rate given was $1.28,

Ah, but Karen, common sense is not applicable in Iraq. Common sense would tell you not to invest in the currency of a county in which the residents of the capital city get less than 6 hours of electricity and limited clean water each day and have an income of $2,000 per year. The RV will come after the new PM is announced and when we least expect it, like a bolt out of the blue.

My understanding is the the CBI has been selling IQD at the auctions, not dollars. The auction volume is expressed in terms of what the CBI takes in - if you look below at today's auction results, set forth below, you will see that it states that the auction price for "selling dinar / [for] USD" is 1170. No auction price is given for buying dinar because the CBI has not been buying dinar at these auctions. Currency Auctions Announcement No. (1686) The latest daily currency auction was held in the Central Bank of Iraq on the 1-7-2010. The results were as follows: Details Notes Number of banks 16 Auction price selling dinar / US $ 1170 Auction price buying dinar / US $ ----- Amount sold at auction price (US $) 134,295,000 Amount purchased at Auction price (US $) ----- Total offers for buying (US $) 134,295,000 Total offers for selling (US $) ----- http://www.cbi.iq/index.php?pid=CurrencyAuctions

Here you go! Iraq : Iraq announces the withdrawal of 70 percent of the excess liquidity Emphasized the continuing support of housing projects, industrial and service Baghdad, Taha Hussein Bank of Iraq could pull a high proportion of surplus liquidity need for the local market as well as continuing to support projects of industrial, service and housing. The general director of the bank Abdul Hussein al-Yassiri told a news conference attended by the "morning" that the bank has achieved an important work focuses on two aspects, namely the withdrawal of excess liquidity from circulation, and then put into the market again, and managed to withdraw 24 trillion and 800 billion dinars, representing 70 percent of the liquidity, referring to the The second aspect of the directions of the Bank is supporting projects its banking and industrial sectors, service and construction projects and the allocation of part of loans to farmers and the financing of housing projects, especially that the country needs to build more than three million housing units, noting that the bank allocated 6 trillion dinars for the purposes of housing, commerce and industry to by granting loans to the public sector as the Ministry of Electricity had granted a loan for the development of electricity and purchases of bonds and remittances in the form of two waves exceeded purchases totaling four trillion and 800 billion dinars, as well as giving companies and the Ministry of Industry more than a trillion and 115 billion dinars, a contribution to the implementation of rehabilitation projects and the development of these companies , in addition to various loans granted by the Bank staff and employees in different state. Speaking of housing loans granted by Iraq to the citizens of that the bank used Balakari as an owner of an experiment in granting housing loans to citizens Vakarz final amount exceeded 300 billion dinars, in addition to the prepared study how to grant housing loans by him directly, because the bank wanted to avoid the mistakes of the many international banks through the equation between the deposits and the type and between loans and advances, indicating the presence of short-term deposits and long-term and there are loans and short-, medium-and long-term bank, which has the right vision for the future must be prepared to this budget and gnawing on that basis, he put it. Director-General warned that the bank is still going to give people housing loans of 30 million dinars, indicating that the bank is required possession of the citizen who wants to get this loan to the land as a place for building the housing units more than others, as well as continue to grant loans that commercial and industrial. Said that Iraq had put a ceiling for advances to exceed one trillion dinars and is currently studying the possibility of developing a new roof or the lifting of the ceiling he reached the bank in the previous stage. http://translate.google.com/translate?hl=en&ie=UTF-8&sl=ar&tl=en&u=http://www.alsabaah.com/paper.php%3Fsource%3Dakbar%26mlf%3Dinterpage%26sid%3D102776&prev=_t&rurl=translate.google.com

Do you know where Sadr is now? He lives in Iraq and is a total Iranian puppet, much more so that Maliki.

The results set forth in this article conflict with the official data from the CBI website. It does seem strange that the cash portion of the auction has been low when there's been more buzz about an RV. CBI Auction Results for 06-03-10: $166.8 M [$3.1 M cash & $163.7 M Transfers Out] Currency Auctions Announcement No. (1666) The latest daily currency auction was held in the Central Bank of Iraq on the 3-Jun-2010. The results were as follows: Details Notes Number of banks 12 Auction price selling dinar / US $ 1170 Auction price buying dinar / US $ ----- Amount sold at auction price (US $) 166,840,000 Amount purchased at Auction price (US $) ----- Total offers for buying (US $) 166,840,000 Total offers for selling (US $) ----- http://www.cbi.iq/index.php?pid=CurrencyAuctions http://www.cbi.iq/documents/CBI_FOREIGN_EXCHANGE_AUCTIONS.pdf

The results set forth in this article conflict with the official data from the CBI website. It does seem strange that the cash portion of the auction has been low when there's been more buzz about an RV. CBI Auction Results for 06-03-10: $166.8 M [$3.1 M cash & $163.7 M Transfers Out] Currency Auctions Announcement No. (1666) The latest daily currency auction was held in the Central Bank of Iraq on the 3-Jun-2010. The results were as follows: Details Notes Number of banks 12 Auction price selling dinar / US $ 1170 Auction price buying dinar / US $ ----- Amount sold at auction price (US $) 166,840,000 Amount purchased at Auction price (US $) ----- Total offers for buying (US $) 166,840,000 Total offers for selling (US $) ----- http://www.cbi.iq/index.php?pid=CurrencyAuctions http://www.cbi.iq/documents/CBI_FOREIGN_EXCHANGE_AUCTIONS.pdf

This is true but only because investors purchasing dinar prefer to have crisp, uncirculated bills. Therefore, on the current market there is a premium for Once the RV occurs, it won't matter. BTW, by "uncirculated", they mean that the bills have never been used in commerce - that they are in "new" condition.

When the Saddam era dinar was supposedly worth 3.22, no one had 10 k notes. Following the US occupation on Iraq, the Saddam era currency was declared invalid and had to be exchanged 1 to 1 for the new dinar which had a much lower value - it was a massive devaluation of their currency which totally wiped out any savings that any ordinary Iraqis might have had at the time. One purpose of this was to remove all of the money available to the insurgency. The RV, if an when it occurs, will, in effect reverse this process and restore purchasing power to the dinar that was wiped out in 2003.

With Iraqi Votes Tallied, Deal-Making Begins - A Good Read Post chazmaz Today at 8:17 pm Here's a good summary of the election results and what lies ahead. Remember that the PM-to-be needs to get 163 seats out of the 325 total. Allawi 91 Maliki 89 Shiites 70 Kurds 43 Independents/Smaller Parties 17 Seats Allocated by Quota 15 It seems strange to me that there needs to be months of negotiation to determine a PM because there aren't that many possible combinations to make 163. Allawi wouldn't align with the Shiites, so he's got to get the Kurds, which would get him to 134, then 29 of the remaining 32 seats. How long would it take to figure out whether or not he can do it? With Iraqi Votes Tallied, Deal-Making Begins The party of Iyad Allawi, right, edged out current Prime Minister Nuri al-Maliki's bloc, but the process of forming a government is just beginning. March 26, 2010 By Charles Recknagel The official results from Iraq's parliamentary elections show former Prime Minister Iyad Allawi's Iraqiya bloc won two more seats than current Prime Minister Nuri al-Maliki's State of Law bloc. The announcement brings an end to weeks of vote-counting in the high-stakes race. Iraqiya won 91 seats in the 325-member Council of Representatives, while the State of Law bloc won 89 won seats. The Iraqi National Alliance, a coalition of mainly Shi’ite groups, won 70 seats, and Kurdistania, made up of the autonomous Kurdish region's two dominant blocs, won 43 seats. Another 17 seats were won by independent candidates and candidates from smaller parties. The last 15 seats will be given to members of religious and ethnic minority groups, according to quotas. One quarter of the seats should be filled by women, according to the Iraqi constitution. In Washington, State Department spokesman P.J. Crowley said the White House congratulates Baghdad and the Iraqi people on "a successful election.” “International observers and more than 200,000 domestic observers expressed their confidence in the overall integrity of the election and found that there’s no evidence of widespread or serious fraud," Crowley said. "This marks a significant milestone in the ongoing democratic development of Iraq.” The State Department called on all candidates and parties "to accept the results, respect the will of the Iraqi people, and work together cooperatively to form a new government in a timely manner." The statement continues: "It will be important for all sides to refrain from inflammatory rhetoric and intimidation. It also is important that the Iraqi government continue to provide security and other essential services for its citizens during this period leading to the formation of a government." As Iraqis waited for the election results today, fresh violence struck the town of Khales in Diyala Province north of Baghdad, with two explosions killing some 40 people. Reports say women and children were among the wounded. Wrangling Begins The release of the election results marks the formal start of what may be an even more difficult process: forming a governing coalition. By failing to produce a decisive winner, the national parliamentary election leaves the field open for not one, but two, major parties to try to seize the initiative in coalition building. And, by producing at least two potential "kingmaker" groups in the background, the election has opened the way for even some of the losers in the election to exert huge influence in the deal-making. The result is almost certain to be a months-long period of negotiations over forming a new government -- a process that could severely test the country's recently won stability. Nabil Ahmed, a correspondent for RFE/RL’s Radio Free Iraq, says there are no parties immediately strong enough to form a ruling coalition on their own. Even though former Allawi's Iraqiya took the most votes, his list and the other frontrunner, Maliki's State of Law bloc, emerged essentially neck-and-neck. Ahmed says that means tough fights ahead. "The winning lists are strong enough to try to make alliances with smaller parties,” he says. “But they also are strong enough to try to break each other apart by wooing away wavering loyalists. So there will be many battles and efforts to create new alliances in the days ahead." Religious Parties Lose Ground He notes that this is a much more complicated situation than the last parliamentary election in 2005, when Shi'ite religious parties swept the poll and later allied with the Kurdish bloc to dominate the new parliament. Even so, it took a full six months of tough negotiating to create a coalition stable enough to rule. This time, the front runners are not Shi'ite religious parties, but secularists or nationalists. Allawi is a Shi'ite secularist. Maliki heads a Shi'ite religious party but has used his years in power to rebrand as a nationalist. A dream team, from Washington's point of view, might be a coalition uniting Allawi and Maliki. That would marginalize the Shi'ite religious parties, which are actively supported by Iran. But Ahmed says this is highly unlikely. "There is quite a lot of personal animosity and that will play its part, too, in any deal-making,” he says. “One of the strongest feuds is between Allawi and Maliki. Neither wants to share power with the other, so they are both almost certain to try to outmaneuver each other by reaching out to the third- and fourth-place finishers instead." Coalition-Building The prospect of such maneuvering puts both the third- and the fourth-place finishers in potential kingmaker roles. The third-place finisher is the Shi'ite religious parties' Iraqi National Alliance and, strongest among them, the loyalists of radical cleric Muqtada al-Sadr. But the Sadrists themselves have deep-seated animosities toward both Allawi and Maliki, dating back to the efforts by both men to crack down on the Sadrists "Mahdi Army." Sadr opposes the U.S. military presence in the country and demands its immediate withdrawal. Since the election, both Allawi and Maliki have said they are open to alliances with Sadr. But it is not clear at what price. The Sadrists have suggested they could make a deal with Maliki's State of Law Coalition but that they would propose their own candidate for prime minister in Maliki's place. Both Allawi and Maliki have also held talks with the fourth-place finisher, Kurdistania. The alliance, composed of the two ruling factions in the Kurdish autonomous region -- the KDP and PUK -- is eager to retain its former king-making status despite losing some of their seats in the national parliament to the Kurdish opposition party, Goran. Ahmed says that because of the highly fragmented political landscape, almost any ruling coalition will -- of necessity -- be more inclusive than the governing coalition in Iraq today. "Maliki's government sought to include some key Sunni politicians despite the largely Sunni boycott of the parliamentary elections in 2005,” Ahmed says. “But today it is no longer a question of goodwill or national interest to reach out across the political spectrum. It will be the only way to put together a bloc large enough to form a government." All this makes the coming days a historic moment filled in equal measure with risk and promise. The risk is that Iraq will fall into an extended political vacuum that also produces a security vacuum -- exactly what happened after the 2005 election. When the new Iraqi government was finally sworn in six months later in 2006, it faced a significantly worse security situation than before. The country tumbled into a spiral of sectarian violence that was in large part due to the distancing of one group -- the Sunni Arabs -- from the political process. But the promise is that this time Iraq might break with that violent past. It could happen if forming a ruling coalition requires incorporating and working with parties across the political spectrum. It would be a major departure from Iraq's history of dictators, coups, and one-party rule, and a large step toward becoming a stable parliamentary democracy. RFE/RL’s Radio Free Iraq and correspondent Heather Maher contributed to this report. With agency reports http://www.rferl.org/content/Iraq_Awaits_Full_Vote_Results_Today_Amid_Growing_Tensions/1994580.html

Point well taken. The CBI statement could be a specific denial of this story, which specifically mentioned a 1,000 rate. Thanks for posting!