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Why does Iraq auction off their Dinar?


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  Hi,

 I'm new here.

I've been reading several Dinar Forums for several months. I chose to register here because this place seems to be the most legitimate.

 

Anyway, my question is why does IRAQ have these Dinar Auctions?

 

I just don't see how auctioning off their currency can have a positive effect on their economy.

Please enlighten me,

Thanks in Advance :)

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They are selling USD not IQD.

 

:cowboy2:

 

exactly .... nothing more to be said :tiphat:

That why Iran need dollars to get what they needs under sanctions.

 

yes ....Iran needs Dollars because there currency is worthless ..... the dollar is the world reserve currency.

Well texas granny hit it on the head.....they sell all the USD they get from oil to get dinar to fund the budget.....

 

and there's another hit on the head ....

 

I really dont know why people are still asking these questions they have been doing this for years now

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I really dont know why people are still asking these questions they have been doing this for years now

 

Remember......not everyone is on the same page. If they're asking it's cause they really dont know.

 

Thank you for understanding.................. :)  :peace:

Edited by millionaire in training
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I have no idea really but if I had to speculate I would guess it has something to do with the fact their currency isn't an internationally traded currency, its not a pegged currency as they say. Maybe the value has to do with interest or demand based on the auctions and not how they are in relation to other currenices.

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This was how Iraq's monetary policy and the auctions were set up after the new dinar was introduced in late 2003 to early 2004.

 

The oil revenues are sent to the DFI account in the U.S. (NY Fed Res) ~ 5% to Kuwait

 

It is currently supervised by COFE ~ Committee of Financial Experts ~ Iraq

 

DFI funds are used to fund Iraq's budget

 

All of the funds in the DFI account (dollars) do not go directly to Iraq. Iraq imports products which are paid in dollars. This process begins with a letter of credit from one of the ministries through the TBI (Trade Bank of Iraq). When the goods are received in Iraq, the vendor is paid in dollars sent by JP Morgan Bank or Citibank in coordination with the TBI.

 

Part of the dollars/oil revenues, not used for imports, are sent to the MOF and then to the CBI where they are sold in exchange for dinar. (Government workers are paid in dinar ~ then they exchange part or all for dollars.

 

10. LETTERS OF CREDITS FOR THE BENEFIT OF IRAQI GOVERNMENTAL ENTITIES

 

The DFI finances letters of credit payments related to the ministries and its departments and business units in accordance with their approved budgets. Letters of credit are facilitated by the Trade Bank of Iraq (TBI), authorized by the MoF and disbursed from the DFI's FRBNY account to the TBI's accounts at JP Morgan Chase Bank and Citibank, N.A.
 
The transferred cash is held at JP Morgan Chase Bank and Citibank, N.A. until evidence of completion of service or receipt of goods is confirmed by the intended Iraqi ministry in accordance with the terms of the letters of credit. The cash margins have not been included as part of the DFI cash balances as they are not controlled by the DFI and are restricted for the payment for the outstanding letters of credit to the suppliers.

 

* Ernst & Young June 2012  AUDIT

 

 

IMF ~ 2004

 

"17. Monetary policy has focused on maintaining price stability, in the context of a stable exchange rate. The CBI has been conducting daily foreign exchange auctions to limit the impact on base money growth of the sale of the government's oil export earnings. This strategy has led to a period of low inflation and a significant accumulation of gross international reserves, which amounted to about US$4,273 billion at end-July 2004 (implying base money coverage of about 60 percent). In addition, the ministry of finance has started conducting bi-weekly treasury bill auctions to roll over bills outstanding with commercial banks. The intent is also to develop a secondary market that will facilitate open market operations by the CBI for the purpose of managing liquidity.

 

18. New financial sector legislation has paved the way for the creation of a modern financial sector. A new commercial banking law in line with international standards was adopted in October 2003. Since then, three foreign banks have already been licensed to begin operations, and more are slated to receive licenses this year. The CBI is now evaluating over 30 license applications and a number of foreign banks have shown interest in acquiring a minority ownership stake in private Iraqi banks. Commercial banks have also been required to strengthen their capital base."

 

In a nutshell~ Hope this helps 

 

Ten~

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how much does the cbi make buying those dinars that the cbi needs to pay the govt workers salarys .. you would think if its the govt who needs these dinars  they should be the ones  paying the spread ....it comes out to around 5 billion dollars a month off those auctions ..

the govt needs them but they charge to buy them if i was an iraqi id say you pay me  the 13 dinars  per dolar .. not me pay you ..

the govt takes in dollars they could just put out more dinars with those dolars in the reserve ..iraq does have a surplus of dollars each month coming in .. 70 billion surplus in the last 2 years comparing exports and imports .. iraq is ahead quite a few dollars ..ive counted  155 billion surplus since 2005

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"how much does the cbi make buying those dinars that the cbi needs to pay the govt workers salarys .. you would think if its the govt who needs these dinars  they should be the ones  paying the spread ....it comes out to around 5 billion dollars a month off those auctions .."

 

The CBI doesn't pay the government workers' salaries. The MOF takes care of that with oil revenues from the DFI account. This is in the budget every year. 

 

"the govt needs them but they charge to buy them if i was an iraqi id say you pay me  the 13 dinars  per dolar .. not me pay you .."

 

The CBI has monetary policies that they have to adhere to:

 

CBI Laws~

 

SECTION 5—OFFICIAL FOREIGN RESERVES

 

Article 27 Management of official foreign reserves
 
The CBI shall conduct transactions in foreign assets and manage all official foreign reserves 
of the State consistent with international best practices and subject to the objectives of 
monetary policy. The Board may invest such reserves in any or all of the following assets: 
 
Article 26 Prohibition on lending to the Government 
 
1. The CBI shall not grant any direct or indirect credits to the Government or any other 
public agency or State-owned entity, except that the CBI may provide liquidity assistance 
under Article 30 to government-owned commercial banks that are subject to the supervision 
of the CBI, provided that such assistance is granted on the same terms and conditions as 
would be extended for the benefit of privately-owned commercial banks. 
 

http://www.cbi.iq/documents/CBILAW-EN_f.pdf

 

~Hi Keep...nice to see you are still around!

 

Edited by tenmillion
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"how much does the cbi make buying those dinars that the cbi needs to pay the govt workers salarys .. you would think if its the govt who needs these dinars  they should be the ones  paying the spread ....it comes out to around 5 billion dollars a month off those auctions .."[/size]

 

The CBI doesn't pay the government workers' salaries. The MOF takes care of that with oil revenues from the DFI account. This is in the budget every year. 

 

"the govt needs them but they charge to buy them if i was an iraqi id say you pay me  the 13 dinars  per dolar .. not me pay you .."[/size]

 

The CBI has monetary policies that they have to adhere to:

 

CBI Laws~

 

SECTION 5—OFFICIAL FOREIGN RESERVES

 

Article 27 Management of official foreign reserves

 

The CBI shall conduct transactions in foreign assets and manage all official foreign reserves 

of the State consistent with international best practices and subject to the objectives of 

monetary policy. The Board may invest such reserves in any or all of the following assets: 

 

Article 26 Prohibition on lending to the Government 

 

1. The CBI shall not grant any direct or indirect credits to the Government or any other 

public agency or State-owned entity, except that the CBI may provide liquidity assistance 

under Article 30 to government-owned commercial banks that are subject to the supervision 

of the CBI, provided that such assistance is granted on the same terms and conditions as 

would be extended for the benefit of privately-owned commercial banks. 

 

http://www.cbi.iq/documents/CBILAW-EN_f.pdf

 

~Hi Keep...nice to see you are still around!

Yea im still hanging around hoping we can get a little something out of this. With.CH7 gone and the announcement of being ablebto back the dinar 2.5 times.its current value, maybe they will put their big biy pants on, remove the program rate, and move up that rate to the point of still backing the dinar 100 percent......its a start!

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The CBI doesn't pay the government workers' salaries. The MOF takes care of that with oil revenues from the DFI account. This is in the budget every year.

 

 

 

ok thats good .. when  people ask why they have auctions most  people say its to recycle the dinars so the govt can pay their govt workers salarys ..

 so they say the cbi has auctions to get dinars to give to the govt  for their dollars  that they get from oil sales from exports . since the govt workers are paid in dinars ..

 

so i ask if they are the ones who need the dinars shouldnt they be the ones who pay the spread ..lol.i know thats goofy .. i was trying to be goofy.. they should pay 13 dinarsspread  per dollar for those dinars ..instead they charge 13 dinars for something they them selves are in need of



it all goes back to that petro dollar thing .. if iraq sold oil in petro dinars that problem would go away



iraq definatly needs to establish a better dinar rate to exchange those perto dollars back to dinars ....this 1166 is silly 



one to one  with a pegged exchange rate  would really simplify things .. no backing with dollars either .. just exchange them into dinars  at 1 to one

Edited by dontlop
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