The IMFs "Program Rate"

[JoeFriday]

There has been some discussion on the term "program rate" in IMF documents. Some think this is the IMF setting Iraq's exchange rate. I think that is backwards. The IMF has "programs" to monitor the stand by agreements it makes with various countries. This is from their glossary page

Program Monitoring

Monitoring by the IMF to determine whether the performance criteria specified and policy commitments made in the context of a Stand-By or an Extended Arrangement are being observed by the member receiving resources (see Conditionality).

Now as part of that program they have to have an exchange rate to use to convert assets into a common currency for analysis purposes. That is the "program rate", its the rate the country has set for its exchange. Its not (as I interpret all this) that the IMF is setting the rate, but just the rate they decide to use. Note it does not exactly track the exchange rate as when Iraq went from 1170 to 1166, the program rate did not change as far as I can tell. If the rate was set by the IMF, then the CBI would not have been allowed to alter it, even by 4 dinars.

Iraq's exchange reate IS determined by M2/reserves, i.e. exactly what the CBI can actually support.

Note that when discussing the IMF's interactions with Afghanistan they also use the term "program rate" (you can find mention of it here http://www.imf.org/external/pubs/ft/scr/2006/cr06251.pdf). However Afghanistan lets their currency float (a managed float, but all floats are managed to some degree), so to be consistent in their analysis the IMF uses their "program rate", not the slightly varying actual rate. Despite the float it hovers around (surprise surprise) M2/reserves.

[dinarck]

Exactly right. 1170 and 1166 fluctuate by the CBI in an effort to curb inflation. That's all. Of course on the dinar forums its all a big conspiracy to hide a massive RV. It's a joke. The dinar is on a crawling peg to the dollar with its entire value based only on the relation between foreign reserves and total money supply. It's basic economics.

I am reading in the main forums about how the UN and IMF punished Iraq by devaluing the dinar. Hahaha....I have truley heard it all now. People clearly are clueless as to how currency works. Who punished Vietnam and gave them the hyperinflated currency they have now? Who punished Iran with a hyperinflated currency? How about Argentina in the past? Brazil? Turkey? Russia? The list goes on. Hyperinflation occurs world wide due to shotty economic policies not punishment by the big bad IMF. Lol.

[dontlop]

Exactly right. 1170 and 1166 fluctuate by the CBI in an effort to curb inflation. That's all. Of course on the dinar forums its all a big conspiracy to hide a massive RV. It's a joke. The dinar is on a crawling peg to the dollar with its entire value based only on the relation between foreign reserves and total money supply. It's basic economics.

I am reading in the main forums about how the UN and IMF punished Iraq by devaluing the dinar. Hahaha....I have truley heard it all now. People clearly are clueless as to how currency works. Who punished Vietnam and gave them the hyperinflated currency they have now? Who punished Iran with a hyperinflated currency? How about Argentina in the past? Brazil? Turkey? Russia? The list goes on. Hyperinflation occurs world wide due to shotty economic policies not punishment by the big bad IMF. Lol.

thats funny :bravo:/>/>

There has been some discussion on the term "program rate" in IMF documents. Some think this is the IMF setting Iraq's exchange rate. I think that is backwards. The IMF has "programs" to monitor the stand by agreements it makes with various countries. This is from their glossary page

Now as part of that program they have to have an exchange rate to use to convert assets into a common currency for analysis purposes. That is the "program rate", its the rate the country has set for its exchange. Its not (as I interpret all this) that the IMF is setting the rate, but just the rate they decide to use. Note it does not exactly track the exchange rate as when Iraq went from 1170 to 1166, the program rate did not change as far as I can tell. If the rate was set by the IMF, then the CBI would not have been allowed to alter it, even by 4 dinars.

Iraq's exchange reate IS determined by M2/reserves, i.e. exactly what the CBI can actually support.

Note that when discussing the IMF's interactions with Afghanistan they also use the term "program rate" (you can find mention of it here http://www.imf.org/external/pubs/ft/scr/2006/cr06251.pdf). However Afghanistan lets their currency float (a managed float, but all floats are managed to some degree), so to be consistent in their analysis the IMF uses their "program rate", not the slightly varying actual rate. Despite the float it hovers around (surprise surprise) M2/reserves.

good job joe :twothumbs:/>/>

the imf link says the program rate is to exchange the dollars and other currencys into dinars

II. DEFINITIONS

3. For purposes of monitoring under the program, a program exchange rate will be

used. This program exchange rate will be set at ID 1,170 per U.S. dollar. The program

exchange rate will be used to convert into Iraqi dinars the U.S. dollar value of all CBI foreign

assets and liabilities denominated in U.S. dollars, as required. For CBI assets and liabilities

denominated in SDRs and in foreign currencies other than the U.S. dollar, they will be

converted in U.S. dollars at their respective SDR-exchange rates prevailing as of

December 31, 2010, as published on the IMF’s website.

page 43 of this document pdf... >>>> http://www.imf.org/e...2011/cr1175.pdf

same link...page 54 ... it talks about its defacto peg ...

IX. Exchange rate arrangement:

The Central Bank of Iraq has been conducting foreign exchange auction on a daily basis

since October 4, 2003. The central bank followed a policy of exchange rate stability which

has translated in a de facto peg of the exchange rate since early 2004. However, from

November 2006 until end 2008, the CBI allowed the exchange rate to gradually appreciate.

As a result, the exchange rate arrangement of Iraq was reclassified to the category of

crawling peg effective November 1, 2006. Since the start of 2009, the CBI returned to its

earlier policy of maintaining a stable dinar. Consequently, the exchange rate arrangement of

Iraq was reclassified effective January 1 2009 as a stabilized arrangement.

Read more:

Edited November 29, 2012 by dontlop

[JoeFriday]

good job joe :twothumbs:/>/>/>/>/>/>/>

the imf link says the program rate is to exchange the dollars and other currencys into dinars

No, its only for calculation not actual exchanges. Note the part you highlight below. Its to convert (not exchange) currency VALUES, not actual currency. For the IMF to try and tell how the country is doing, they have decided to factor out small fluctuations in the exchange rate and use a fixed rate that is set when the standby agreement is made (and maybe modified at times as well, I don't know). Otherwise comparisons are more complicated. It is not a constraint on Iraq to use this rate in actual exchanges, but it is set from the actual rate that Iraq was using when the stand by agreement was enacted, and then frozen to make comparisons easier. Note also it says "dollar value of all CBI foreign assets and liabilities...". This isn't talking about currency exchanges in Iraq, but analysis of the CBI and how the IMF will carry that out.

II. DEFINITIONS

3. For purposes of monitoring under the program, a program exchange rate will be

used. This program exchange rate will be set at ID 1,170 per U.S. dollar. The program

exchange rate will be used to convert into Iraqi dinars the U.S. dollar value of all CBI foreign

assets and liabilities denominated in U.S. dollars, as required. For CBI assets and liabilities

denominated in SDRs and in foreign currencies other than the U.S. dollar, they will be

converted in U.S. dollars at their respective SDR-exchange rates prevailing as of

December 31, 2010, as published on the IMF’s website.

Edited November 29, 2012 by JoeFriday

[dontlop]

2. Justifications for exchange-rate adjustment: there are a number of important and powerful arguments which support the view that the official exchange rate reduces the real value of foreign currency for purposes of calculating the economic national profitability for investment projects and hence for the purposes of investment planning. It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc.

The justifications to call for the use of an exchange rate that is lower than the official exchange rate are:

· The use of an exchange rate that is lower than the official rate is the appropriate action at the investment planning level to translate the country’s economic strategy aiming at stimulating central investments in the sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of domestic production base in order to reduce imports and compensate it with local commodities. This helps to reduce reliance on foreign exchange earnings from crude oil exports and increases the share of non-oil sectors in the local production.

· The application of the amended exchange rate on project imported inputs will assist in directing investments away from aggregated sectors dependent on imported inputs and the preference of those sectors that rely on locally produced inputs.

· The use of the amended exchange rate helps to correct the balance in favor of the traded goods sectors compared to non-traded goods.

· The real exchange rate has declined rapidly since the early seventies, through rapid rise of the level of prices and local costs which led by the steadiness of the official exchange rate to change in prices and actual local rate costs that gave an advantage for imported goods at the expense of locally produced goods, meaning that it led to deterioration of the competitiveness of alternative replacement goods and export commodities.

· This action shows that the official exchange rate overestimates the value of the dinar, compared to the foreign currency and from the promoting goods substituting imports and export commodities point of view of.

And in support to this view is the state’s utilization and in a broad approach to the customs and quantitative protection policies especially for consumer goods, as well as export subsidies that exports have through an amended export exchange rate.

3. Estimate the amended exchange rate of the Iraqi dinar to be used in technical and economical feasibility studies and for (1.134) dollar per dinar. This price should be approved for 3 years until re-appreciation by the competent authorities.

hey joe .. whats this all about

http://www.mop.gov.iq/mop/index.jsp?sid=1&id=308&pid=295&lng=en

Edited November 29, 2012 by dontlop

[JoeFriday]

hey joe .. whats this all about

http://www.mop.gov.iq/mop/index.jsp?sid=1&id=308&pid=295&lng=en

I think it is making the case that for planning purposes they have to use an realistic rate (e.g. calculated form export/import costs etc) and not the "official" rate (of 3.208 USD per dinar). No date, but I would suspect its old. This perhaps corresponds to the time when the CBI history page says the official rate was 3.21 but the black market rate was more like 1 and change (in the 80s).

[skitealwedrop]

Joe,

I think that your post is interesting. I gave you a +. In the interim, I question how the CBI could support a higher rate when the GOI is lacking in economic productivity, and other political matters. Wouldn't the balance sheet of the Iraqi Republic come into play when determining the true value of IQD, as per the CBI? The two entities are symbiotic from a financial standpoint.

It would be interesting to see a Balance Sheet of the Iraqi Republic that wasn't prepared and audited by KPMG, offshore based out of Lebanon.

The IMF is cautious for a reason.

Ski

[dinarck]

I love how old Iraqi documents are dug up and spun to mean a RV. That document speaks of a time that the actual exchange rate was over 3 but the real value was more around 1. It states clearly in the article that the actual exchange rate was exaggerated and its true value at the time was closer to 1. Big deal.

Program rate, artificial rate, conspiracy rate.....its all a bunch of nonsense. The dinar is valued right where it should be based on the amount in circulation in relation to the reserves backing it.

[truthful1]

2. Justifications for exchange-rate adjustment: there are a number of important and powerful arguments which support the view that the official exchange rate reduces the real value of foreign currency for purposes of calculating the economic national profitability for investment projects and hence for the purposes of investment planning. It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc.

The justifications to call for the use of an exchange rate that is lower than the official exchange rate are:

· The use of an exchange rate that is lower than the official rate is the appropriate action at the investment planning level to translate the country’s economic strategy aiming at stimulating central investments in the sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of domestic production base in order to reduce imports and compensate it with local commodities. This helps to reduce reliance on foreign exchange earnings from crude oil exports and increases the share of non-oil sectors in the local production.

· The application of the amended exchange rate on project imported inputs will assist in directing investments away from aggregated sectors dependent on imported inputs and the preference of those sectors that rely on locally produced inputs.

· The use of the amended exchange rate helps to correct the balance in favor of the traded goods sectors compared to non-traded goods.

· The real exchange rate has declined rapidly since the early seventies, through rapid rise of the level of prices and local costs which led by the steadiness of the official exchange rate to change in prices and actual local rate costs that gave an advantage for imported goods at the expense of locally produced goods, meaning that it led to deterioration of the competitiveness of alternative replacement goods and export commodities.

· This action shows that the official exchange rate overestimates the value of the dinar, compared to the foreign currency and from the promoting goods substituting imports and export commodities point of view of.

And in support to this view is the state’s utilization and in a broad approach to the customs and quantitative protection policies especially for consumer goods, as well as export subsidies that exports have through an amended export exchange rate.

3. Estimate the amended exchange rate of the Iraqi dinar to be used in technical and economical feasibility studies and for (1.134) dollar per dinar. This price should be approved for 3 years until re-appreciation by the competent authorities.

hey joe .. whats this all about

http://www.mop.gov.iq/mop/index.jsp?sid=1&id=308&pid=295&lng=en

dontlop, this is very very ancient. Its been around before the current iqd was ever issued

[JoeFriday]

Joe,

I think that your post is interesting. I gave you a +.

In the interim, I question how the CBI could support a higher rate when the GOI is lacking in economic productivity, and other political matters. Wouldn't the balance sheet of the Iraqi Republic come into play when determining the true value of IQD, as per the CBI? The two entities are symbiotic from a financial standpoint.

That is certainly true since the only way the CBI builds its reserves is from exchanging the dollars the GOI gets for oil. But I'm not sure what you mean by the balance sheet for the Iraqi Republic. The value of stuff in private hands or owned by the government (tanks, buildings, roads) doesn't have a bearing on the exchange rate as I see it. The CBI issues currency and backs them with dollars. So the rate is just the total they have issued, physically or electronically (i.e. M2) divided by the reserves. How would assets, or debt play into that?

There are certainly indirect impacts of GOI policy around debt and taxes and foreign trade and such that would cause the CBI to adjust the money supply or tend to push inflation one way or the other as the economy heats up or cools down etc. But, in a sort of snapshot sense, of what the exchange rate should be "now", I think its just M2/reserves.

Edited November 29, 2012 by JoeFriday

[dontlop]

dontlop, this is very very ancient. Its been around before the current iqd was ever issued

how about that .. i guess you were around to read it before the new dinar ?

it comes directly off the ministry of planning web site .. and on that web site it has a search engine

.. guess what you can enter any date after 2003 ,, and get all kinds of information..

but try any dates before that .. show me one web page on anything thats before the new govt of iraq .. show me anthing saddam on it .. theres nothing . i dont know why they would bring an old dinar article to the new ministry of finance web site ..

with no date on this ,, how do you know when it was printed ?

i willl answer that for ya .. >>> you dont know

Edited November 29, 2012 by dontlop

[truthful1]

how about that .. i guess you were around to read it before the new dinar ?

it comes directly off the ministry of planning web site .. and on that web site it has a search engine

.. guess what you can enter any date after 2003 ,, and get all kinds of information..

but try any dates before that .. show me one web page on anything thats before the new govt of iraq .. show me anthing saddam on it .. theres nothing . i dont know why they would bring an old dinar article to the new ministry of finance web site ..

with no date on this ,, how do you know when it was printed ?

The article itself is telling you the date. its when the official exchange rate was 3.20, a long time ago. I need not even go any further, although i could. you responded to me, with a tone i dont care for. i wont share my experience and research with you. I now see what i get, for responding to your question. good day and goodbye.

[skitealwedrop]

:)/>/>/>/>

That is certainly true since the only way the CBI builds its reserves is from exchanging the dollars the GOI gets for oil. But I'm not sure what you mean by the balance sheet for the Iraqi Republic. The value of stuff in private hands or owned by the government (tanks, buildings, roads) doesn't have a bearing on the exchange rate as I see it. The CBI issues currency and backs them with dollars. So the rate is just the total they have issued, physically or electronically (i.e. M2) divided by the reserves. How would assets, or debt play into that?

There are certainly indirect impacts of GOI policy around debt and taxes and foreign trade and such that would cause the CBI to adjust the money supply or tend to push inflation one way or the other as the economy heats up or cools down etc. But, in a sort of snapshot sense, of what the exchange rate should be "now", I think its just M2/reserves.

The CBI is selling USD via auctions and other means to beef up their balance sheet. I'm fine with that. In turn, the CBI doesn't sell oil, the Government of Iraq pumps and sells their commodity. Keep in mind that the GOI and CBI are two separate entities, similar to the UST and the government of the US. The GOI has to produce if they wish to support a higher value in their currency, to be supported by the the CBI.

Current Audited Balance Sheets are telling when reviewing the health of any entity.

[JoeFriday]

The CBI is selling USD via auctions and other means to beef up their balance sheet. I'm fine with that.

I would say the auctions have nothing to do with their balance sheet. The auctions are about exchange rate stability. Their liabilities (dinars in M2) and their assets (dollars, euros, gold, etc) go up and down in proportion (though that does change a little based on the auction price) when they either buy or sell dinars. They do so both to supply other downstream banks with dinars, but also to stabilize the rate by offering more or less dollars or dinars into the auctions via supply and demand (not sure how well that is working for them).

In turn, the CBI doesn't sell oil, the Government of Iraq pumps and sells their commodity. Keep in mind that the GOI and CBI are two separate entities, similar to the UST and the government of the US. The GOI has to produce if they wish to support a higher value in their currency, to be supported by the the CBI.

Don't mean to sound contrarian, but the GOI growing oil production has no impact on the exchange rate as I see it. No matter how much the GOI exchanges (due to growing sales), dollars coming in to the CBI (from the GOI's oil sales) increases reserves and dinars going out (in exchange back to the GOI to pay for stuff in their budget) increases M2 by the same amount (proportional to the exchange rate). Its only when the GOI wants dinars for its dollars that this happens. If the GOI just deposits dollars into its account at the CBI that does not its foreign reserves.

Current Audited Balance Sheets are telling when reviewing the health of any entity.

But governments don't produce balance sheets, for them its just the budget and thier total debt. They have no assets beyond tax or oil royalty revenue holding accounts. When they buy a tank, it doesn't go on a balance sheet as a depreciating asset. So for private entities like banks even central banks, businesses, individuals, charities, indeed the balance sheet is key, but not for governments.

[dinarck]

The CBI is selling USD via auctions and other means to beef up their balance sheet. I'm fine with that. In turn, the CBI doesn't sell oil, the Government of Iraq pumps and sells their commodity. Keep in mind that the GOI and CBI are two separate entities, similar to the UST and the government of the US. The GOI has to produce if they wish to support a higher value in their currency, to be supported by the the CBI.

Current Audited Balance Sheets are telling when reviewing the health of any entity.

Basically Iraq produces around 100 billion in oil per year and spends around 100 billion per year in their budget so it looks like a wash but its not. The GOI actually borrows billions each year from entities to find their budget which shows that 100 billion a year in oil sales isn't all profit. For the rate to ever increase even slightly they would have to increase production dramatically and start to run a surplus. Even if this occurred there is no guarantee that the rate would increase. The CBI may just keep printing dinar as their reserves grew.

This is why its humorous to read constantly on this site about how wealthy Iraq is when in fact they are in debt.

[JoeFriday]

Basically Iraq produces around 100 billion in oil per year and spends around 100 billion per year in their budget so it looks like a wash but its not. The GOI actually borrows billions each year from entities to find their budget which shows that 100 billion a year in oil sales isn't all profit. For the rate to ever increase even slightly they would have to increase production dramatically and start to run a surplus. Even if this occurred there is no guarantee that the rate would increase. The CBI may just keep printing dinar as their reserves grew.

I think its worse than this. The CBI's reserves only grow when the GOI exchanges dollars for dinars, not just when the GOI deposits their petri-dollars and when the do exchange M2 and reserves grow in perfect proportion so there is no gain in exchange rate.

[skitealwedrop]

I would say the auctions have nothing to do with their balance sheet. The auctions are about exchange rate stability. Their liabilities (dinars in M2) and their assets (dollars, euros, gold, etc) go up and down in proportion (though that does change a little based on the auction price) when they either buy or sell dinars. They do so both to supply other downstream banks with dinars, but also to stabilize the rate by offering more or less dollars or dinars into the auctions via supply and demand (not sure how well that is working for them).

Don't mean to sound contrarian, but the GOI growing oil production has no impact on the exchange rate as I see it. No matter how much the GOI exchanges (due to growing sales), dollars coming in to the CBI (from the GOI's oil sales) increases reserves and dinars going out (in exchange back to the GOI to pay for stuff in their budget) increases M2 by the same amount (proportional to the exchange rate). Its only when the GOI wants dinars for its dollars that this happens. If the GOI just deposits dollars into its account at the CBI that does not its foreign reserves.

But governments don't produce balance sheets, for them its just the budget and thier total debt. They have no assets beyond tax or oil royalty revenue holding accounts. When they buy a tank, it doesn't go on a balance sheet as a depreciating asset. So for private entities like banks even central banks, businesses, individuals, charities, indeed the balance sheet is key, but not for governments.

The only assets that Iraq maintains is USD, maybe some gold and the unrealized asset, which is their oil reserves. They can't book it if they don't pump it. Iraq is way beyond their learning curve.

This investment is currency speculation. I treat it as such.

[20Mil]

The only assets that Iraq maintains is USD, maybe some gold and the unrealized asset, which is their oil reserves. They can't book it if they don't pump it. Iraq is way beyond their learning curve.

This investment is currency speculation. I treat it as such.

No , Iraq's foreign reserves consist of USD, EUR, and GBP. I don't remember the exact % of each currency that they hold. This is what backs their 72 Trillion M2.

[skitealwedrop]

No , Iraq's foreign reserves consist of USD, EUR, and GBP. I don't remember the exact % of each currency that they hold. This is what backs their 72 Trillion M2.

Show me a current balance sheet of the Iraqi Republic and the CBI. I would love to see the audited numbers. I'm an accounting nerd. Audited Financial Statements are meaningful to me.

[rockfl9]

Ski:::: You can see both at cbi.iq.... i am familiar with the usual terms in a corporate financial statement, but as I looked at the it has some entrys that may be unique to a central bank... Numbers were YE 2011 though...

[skitealwedrop]

Ski:::: You can see both at cbi.iq.... i am familiar with the usual terms in a corporate financial statement, but as I looked at the it has some entrys that may be unique to a central bank... Numbers were YE 2011 though...

Yep. I have visited the CBI website, often. Looks like KPMG, offshore (based out of Lebanon) has dropped the ball. Similar to the GOI. I'm not surprised by the current financial state of Iraq.

My question is how long can Iraq continue to trade with USD. At some point Iraq must rely on their own currency. The currency of the infidels isn't necessarily attractive to others in the ME, from a business stand point.

[JoeFriday]

Yep. I have visited the CBI website, often. Looks like KPMG, offshore (based out of Lebanon) has dropped the ball.

In what way?

My question is how long can Iraq continue to trade with USD. At some point Iraq must rely on their own currency. The currency of the infidels isn't necessarily attractive to others in the ME, from a business stand point.

You mean using dollars internally? Do we know how much are used? If its a lot then that presents an even bigger problem as their effective M2 gets even bigger.

If you mean externally, they are going to continue to sell oil for dollars pretty much forever as its their only means of building up reserves and they don't have any other significant exports and likely will not for quite some time to come.

[MrFnHappy]

In what way?

You mean using dollars internally? Do we know how much are used? If its a lot then that presents an even bigger problem as their effective M2 gets even bigger.

If you mean externally, they are going to continue to sell oil for dollars pretty much forever as its their only means of building up reserves and they don't have any other significant exports and likely will not for quite some time to come.

In today's auction total sales were $200,800,000, of which 32,775,000 were actual cash dollars.

This is roughly 16% of the total sales, which is up slightly from what I have seen over the last year or more (typically 10% on the low end, and 12-14% on the high side).

[JoeFriday]

In today's auction total sales were $200,800,000, of which 32,775,000 were actual cash dollars.

This is roughly 16% of the total sales, which is up slightly from what I have seen over the last year or more (typically 10% on the low end, and 12-14% on the high side).

OK, I'm not sure what to make of that. If they do 4 auctions a week for 45 weeks of the year that would total up to $36B USD. If that actually represents a years worth of dollar use in the economy than that's maybe 25% of GDP, 50% of M2? But Im not sure it does represent that.

But, now I'm also going to reverse myself and say, why does this matter? It does make M2 bigger than just the dinar value of M2, but it also has the dollars to exchange. i.e. if all those transactions were done in dinars, by those dollars being exchanged for dinars, then nothing changes but M2 and reserves both get bigger. So why does it matter?

[dontlop]

2. Justifications for exchange-rate adjustment: there are a number of important and powerful arguments which support the view that the official exchange rate reduces the real value of foreign currency for purposes of calculating the economic national profitability for investment projects and hence for the purposes of investment planning. It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc.

The justifications to call for the use of an exchange rate that is lower than the official exchange rate are:

· The use of an exchange rate that is lower than the official rate is the appropriate action at the investment planning level to translate the country’s economic strategy aiming at stimulating central investments in the sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of domestic production base in order to reduce imports and compensate it with local commodities. This helps to reduce reliance on foreign exchange earnings from crude oil exports and increases the share of non-oil sectors in the local production.

· The application of the amended exchange rate on project imported inputs will assist in directing investments away from aggregated sectors dependent on imported inputs and the preference of those sectors that rely on locally produced inputs.

· The use of the amended exchange rate helps to correct the balance in favor of the traded goods sectors compared to non-traded goods.

· The real exchange rate has declined rapidly since the early seventies, through rapid rise of the level of prices and local costs which led by the steadiness of the official exchange rate to change in prices and actual local rate costs that gave an advantage for imported goods at the expense of locally produced goods, meaning that it led to deterioration of the competitiveness of alternative replacement goods and export commodities.

· This action shows that the official exchange rate overestimates the value of the dinar, compared to the foreign currency and from the promoting goods substituting imports and export commodities point of view of.

And in support to this view is the state’s utilization and in a broad approach to the customs and quantitative protection policies especially for consumer goods, as well as export subsidies that exports have through an amended export exchange rate.

3. Estimate the amended exchange rate of the Iraqi dinar to be used in technical and economical feasibility studies and for (1.134) dollar per dinar. This price should be approved for 3 years until re-appreciation by the competent authorities.

hey joe .. whats this all about

http://www.mop.gov.iq/mop/index.jsp?sid=1&id=308&pid=295&lng=en

in this article , even though its old . they argure the reasons for lowering the exchange rates on the dinar .. , its just an example of what is involved in determinating an exchange rate

.

Edited February 2, 2013 by dontlop