Seminar on the central bank auction and determine the foreign exchange rate

[yota691]

 

Seminar on the central bank auction and determine the foreign exchange rate

 

      Friday   06   November   2015 | 08:20

 

 

 

 

 

The issue of monetary reserves, which are still under discussion

 

Life

Governor of the Central Bank of Iraq Ali Mohsen Keywords announced that the nature of the Iraqi economy Reclining on oil resources, make the relationship between fiscal and monetary policy, including an interactive relationship necessitated by the nature of the revenue and expenditure of the pricing of the dollar. He pointed out that «Central» exercised important roles in this process, including the financing of the current expenditure of the public budget, with the dollar buying from the Ministry of Finance to cover the needs of the Iraqi dinar, in accordance with the allocations required in the general budget. And contributes to «Central» also in finance imports of the commercial sector, while the dollar selling process means the withdrawal of the dinar from the local market, which will help the bank to curb money supply and reduce the resort to printing more currency. He said at a seminar in «Institute of the progress of development policies», attended by experts and interested in the money sector of the economy, that «such activity is not essential for central banks in the world, it is very rare to have the central sales window, but because of the nature of the Iraqi economy, Central took over this task, while the task required to intervene when there is a disruption in the exchange rate, as in the European Union ». He pointed to the issue of monetary reserves, which are still under discussion, and stressed that the reserve is the difference between what the central buys and sells. And over, it goes to the international reserves, and that the function of the reserve financing imports and other transfers and coverage, and the foreign currency reserve is the difference between the dollar sales of the Ministry of Finance to the Central Bank and the central bank sales to the private sector. And confirmed the existence of the adequacy of the reserve criteria, such as coverage of imports for a period of 6 months and cover the local currency and foreign debt. He noted Keywords to the presence of important rules govern the process of selling the dollar to cover imports of personal and transfers of the private sector, including the Central Bank Law Article 28 and guidance of the International Monetary Fund economic system according to the Constitution, and anti-money laundering law. He pointed out the real solutions such as the purchase or sale simple unconditional, cash and futures, and to require banks to apply the principle «know your customer» and the application of anti-money laundering and terrorism financing law. He pointed to the devaluation of the Iraqi dinar by raising the dollar exchange rate of 10 percent to 1300 dinars to the dollar Options , what provides the general budget of 5 trillion dinars ($ 4.2 billion), or raise the dollar exchange rate of 20 percent to 1400 dinars, providing budget 9 trillion dinars. He said that the reduction option easy, but it does not help in the reform of the structural problems, and the devaluation Local useful for exporting countries to activate the export. He added that «Iraq importing country, and to reduce the currency hurt the purchasing power of citizens with limited income. The «can taxes play an important role in the finance, justice and balance without compromising the slide limited income, as can achieve economic goals and social and financial». The head of the «Institute of the progress of development policies» and former Minister of Planning Mahdi Al-Hafiz, pointed out that the national need not require the continuation of the so-called dollar auction, organized by the «Central», but must be handled freely and without restrictions. And it calls for counter-opinion to uphold the auctions and to provide the necessary facilities for the conduct of this operation, and we must stop at the experiences of neighboring countries and operations. He asked Hafiz for the exchange rate, which raises problematic several, he said, «How can that half of the process required to determine the exchange rate, and is related to the economic and financial situation of the state»? Turning economist Ahmed Alobreha to points concerning the path expected of the Iraqi economy, pointing to the difficulty of reducing the demand sector Special for foreign currency in the current scope of the exchange rate and income levels. He added that the national economy is a lack of diversified production base that can supplement the national market alternatives to imports of goods and services, adds restrictions and weakens the effectiveness of efforts to address the problem of policies.He pointed out that «the private sector was unable to contribute to the display of foreign currency, as well as government non-oil sector, and foreign investment policy did not succeed in adding a tributary albeit in a limited form. Iraq has faced interest on the loans in the international market can not afford the prices, and as a result of crude oil remains the only source of foreign currency, and must be serious and responsible move towards real economic development to pay a danger for Iraq ».

[Texstorm]

Great Article Yota ! Now what they going to do ?

[yota691]

Iraq: a seminar on the central bank auction and determine the foreign exchange rate

• •  

Version: paper - InternationalFriday, November 6, 2015 (00:00 - GMT)

Last update: Friday, November 6, 2015 (00:00 - GMT)BAGHDAD - Adel Mahdi 

Iraqi Central Bank Governor Ali Mohsen Keywords announced that the nature of the Iraqi economy Reclining on oil resources, make the relationship between fiscal and monetary policy, including an interactive relationship necessitated by the nature of the revenue and expenditure of the pricing of the dollar. He pointed out that «Central» exercised important roles in this process, including the financing of the current expenditure of the public budget, with the dollar buying from the Ministry of Finance to cover the needs of the Iraqi dinar, in accordance with the allocations required in the general budget. And it contributes to «Central» also in the financing of imports and the commercial sector, while the sale process of the dollar means the withdrawal of the dinar from the local market, which will help the bank to curb money supply and reduce the resort to printing more currency.

He said at a seminar in «Institute of the progress of development policies», attended by experts and interested in the money sector of the economy, that «such activity is not essential for central banks in the world, it is very rare to have the central sales window, but because of the nature of the Iraqi economy, Central took over this task ,. While the task required to intervene when there is an imbalance in the exchange rate, as in the European Union »

He pointed to the issue of monetary reserves, which are still under discussion, and stressed that the reserve is the difference between what the central buys and sells. And over, it goes to the international reserves, and that the function of the reserve financing imports and other transfers and coverage, and the foreign currency reserve is the difference between the dollar sales of the Ministry of Finance to the Central Bank and the central bank sales to the private sector. And he confirmed the existence of the reserve adequacy criteria, such as coverage of imports for a period of 6 months and cover the local currency and foreign debt.

Keywords He pointed to the presence of important rules govern the process of selling the dollar to cover imports of personal and transfers of the private sector, including the Central Bank Law Article 28 and guidance of the International Monetary Fund economic system according to the constitution, and the law against money laundering. He pointed out the real solutions such as the purchase or sale simple unconditional, cash and futures, and to require banks to apply the principle «know your customer» and the application of anti-money laundering and terrorism financing law.

He pointed to the devaluation of the Iraqi dinar options by raising the dollar exchange rate of 10 percent to 1300 dinars to the dollar, providing the general budget of 5 trillion dinars ($ 4.2 billion), or raise the dollar exchange rate of 20 percent to 1400 dinars, providing budget 9 trillion dinars.

He said that the reduction option easy, but it does not help in the reform of the structural problems, and the local currency is good for exporting countries cut to stimulate exports. He added that «Iraq importing country, and to reduce the currency hurt the purchasing power of citizens with limited income. The «taxes can play an important role in the finance, justice and balance without compromising the low-income segments, as can achieve economic goals, social and financial.»

The head of the «Institute of the progress of development policies» former Planning Minister Mehdi al-Hafez, pointed out that the national need not require the continuation of the so-called dollar auction, organized by the «Central», but must be handled freely and without restrictions. And it calls for counter-opinion to uphold the auctions and to provide the necessary facilities for the conduct of this operation, and we must stop at the experiences of neighboring countries and operations. He asked Hafiz for the exchange rate, which raises several problematic, he said, «How can that half of the process required to determine the exchange rate, and is related to the economic and financial situation of the state»?

Turning economist Ahmed Alobreha points relating to the expected path of the Iraqi economy, pointing to the difficulty of reduced private sector demand for foreign currency in the current scope of the exchange rate and income levels. He added that the lack of the national economy to a diversified productive base that can supplement the national market alternatives to imports of goods and services, adds restrictions and weakens the effectiveness of efforts to address the problem of policies.

He pointed out that «the private sector was unable to contribute to the display of foreign currency, as well as the non-oil government sector, and the policy of foreign investment did not succeed in adding a tributary albeit in a limited form. Iraq has faced interest on the loans in the international market can not afford the prices, and as a result of crude oil remains the only source of foreign currency, and must be serious and responsible move towards real economic development to pay a danger for Iraq ».

[SgtFuryUSCZ]

***///

 

Good morning, MasterYOTA...   

 

Lots of talk recently re: reserves and now we wish we knew exactly

what Central Bank Law Article 28 entails...

 

The numbers they lay out here are fascinating us to the nth degree ...

 

Lots of interesting math going on here in these articles...

 

We left our abacus back in the bush...

Hope one of the geniuses here could tell us if all this math boils down to Iraq's ability

to afford an awesome revaluation ... soon!

[yota691]

SECTION 6—MONETARY FUNCTIONS Article 28 Open market operations and standing facilities The CBI may, for the achievement of its objectives, (i) perform open market operations with commercial banks that are licensed or hold permits issued by the CBI under the Banking Law or, at the discretion of the CBI and subject to regulations set forth by the CBI, other appropriately licensed financial intermediaries; and (ii) provide standing facilities to commercial banks that are licensed or hold permits issued by the CBI under the Banking Law and subject to regulations set forth by the CBI by: a. purchasing or selling outright (spot and forward), or under repurchase agreements or other similar financial instruments, debt securities issued by the CBI or by the Government, bearing market yields provided that purchases of debt securities issued by the Government through open market operations shall only be made in the secondary market. b. purchasing or selling outright (spot and forward) foreign exchange; c. discounting bills of exchange or promissory notes; d. making loans fully secured by pledges of collateral; and e. accepting interest-bearing deposits from banks.

[SgtFuryUSCZ]

***///

 

Thanks for the Article 28 post, YerYOTAness !  

You're awesomness is only superceded by your handsomeness !   

[WheresmyRV?]

Awesome article! Here's to a 1 to 1 rate! :)

[salt-life]

When yota doesn't have the link...........just "click" on the picture..............here are the article links to both post..........

 

post #1  http://www.alqurtasnews.com/news/131453/%D9%86%D8%AF%D9%88%D8%A9-%D8%AD%D9%88%D9%84-%D9%85%D8%B2%D8%A7%D8%AF-%D8%A7%D9%84%D8%A8%D9%86%D9%83-%D8%A7%D9%84%D9%85%D8%B1%D9%83%D8%B2%D9%8A-%D9%88%D8%AA%D8%AD%D8%AF%D9%8A%D8%AF-%D8%B3%D8%B9%D8%B1-%D8%B5

 

 

post #3    http://www.alhayat.com/Articles/11942709/%D8%A7%D9%84%D8%B9%D8%B1%D8%A7%D9%82--%D9%86%D8%AF%D9%88%D8%A9-%D8%AD%D9%88%D9%84-%D9%85%D8%B2%D8%A7%D8%AF-%D8%A7%D9%84%D8%A8%D9%86%D9%83-%D8%A7%D9%84%D9%85%D8%B1%D9%83%D8%B2%D9%8A-%D9%88%D8%AA%D8%AD%D8%AF%D9%8A%D8%AF-%D8%B3%D8%B9%D8%B1-%D8%B5%D8%B1%D9%81-%D8%A7%D9%84%D8%B9%D9%85%D9%84%D8%A7%D8%AA-%D8%A7%D9%84%D8%A3%D8%AC%D9%86%D8%A8%D9%8A%D8%A9

[Laid Back]

CBI knows is time to give real value to the dinar.

They have been reducing the note count for years

They have 1500% reserves to cover all dinar in circulation

Go increase exchange rate

[NeedRv]

GO RV.... lets HOPE    they want to do a 1:1...... makes sense to me... 

[ChuckFinley]

I can not agree more with you guys. They have been draining the dinar notes for years now and I am a strong believer that it will be 1 to 1 or as close as possible.

[yota691]

Salt Life I may misunderstand ya....but I always have a Link...I sometimes insert them in the picture...but mainly they are in the title...Hoping everyone is having a Great Day....

[Candy01]

YES, HERE IS TO A ONE TO ONE RATE!!

 

Thanks everybody!!

 

:backflip: :praying:

[jeepguy]

I will     my pants      if it gets too one too one  { 1 to 1 value }                          ( that was not  a  negative  toward the article  )   just  a  pictorial  of what could happen if it went too a 1 too 1 value   

[NoviceInvestor]

Am I of correct thinking here or not and in advance I ask you to correct me if I am wrong?..

To me it looks like we are really on the home run...?

But I'm wondering will we celebrate an early Christmas present?..

Edited November 6, 2015 by NoviceInvestor

[magawatt]

I'm hoping for before Christmas please! I'm wishing for an ORBO in my stocking.

Http://steornnews.com/

[four wheel drift]

Totally cool. I want cold fusion.

FWD

GO RV

[magawatt]

That's in the coming days!

[calkid11]

Thank you Yota

[four wheel drift]

That's in the coming days!

We would have it if Big Oil wasn't so powerful. Just sayin it's been around awhile.

FWD

GO RV

[magawatt]

Well.......let's say it's been a long and winding road. The companies involved didn't need Big Oil to mess things, they were able to do it by themselves. At least one group seems viable and apparently sufficiently funded. 2017 will be very interesting. Just hope Iraq RVs before oil is totally obsolete!

[Antietam]

Did I miss something in the article here? I thought the article said they were considering DEVALUING the dinar exchange rate to 1400 to 1, which is a 20% move in the WRONG direction, people. We want it to go 900, 800, 500, 100 etc to 1, not 1166, 1300, 1400 to 1 they seemed to be talking about. Clear this up for me.

[magawatt]

Double post

Edited November 7, 2015 by magawatt

[sandfly]

THANKS YOTA

[yota691]

An investor looks at a shares price list at the Iraqi Stock Exchange (ISX) in Baghdad, April 2, 2013.  (photo by REUTERS/Mohammed Ameen)

Will dinar exchange rate impact Iraqi financial crisis?

In light of the suffocating financial crisis plaguing the Iraqi economy following the sharp decline in oil prices, experts and concerned parties are discussing the most appropriate option to fix the exchange rate.

Summary⎙ Print In light of the decreasing oil prices that led to an economic crisis in Iraq, the Iraqi government has been discussing options to reduce the dinar-dollar exchange rate.

Author Zakaa Mokhles al-KhalidiPosted December 11, 2015

TranslatorCynthia Milan

Original Article The Iraqi parliament had discussed the possibility of reducing the dinar-dollar exchange rate by 10% to reach 1,300 dinars per dollar to supply the general budget with 5 trillion dinars ($4.2 billion), or by 20% to reach 1,400 dinars per dollar to supply it with 9 trillion dinars (about $8 billion).

However, this method increases government resources at the expense of citizens. The losing parties are ordinary citizens, especially those with limited incomes. The purchasing power of their income will drop, especially with the rise in prices of imported goods. The creditors in local currency will also be affected, including those holding Iraqi treasury bonds.

Moreover, Iraq’s almost total reliance on oil revenues, its poor resources such as goods and services other than oil, the existence of financial investments abroad and large foreign reserves and the high cost of external borrowing all indicate a lack of available options to address the current shortage of government foreign-exchange resources. This means that the only solutions are cutting spending, trying to increase some types of direct taxes and fees and issuing treasury bonds in the local market.

The Iraqi dinar’s exchange rate was equal to $3.30 before the outbreak of the Iran-Iraq War. Then $1 became equivalent to 3,000 dinars during the economic blockade from 1990 to 2003. Anyone who has followed the dinar will realize that the problem lies in the difference between the dollar’s supply and demand and the dinar’s supply and demand. It is a simple equation that controls not only the currency prices, but also the prices of all kinds of goods and services. So, for the state to control one side of the equation, it has to control the other side to ensure that the exchange rate will be stable.

When Iraq’s oil resources were limited before OPEC first raised prices in 1973, the country relied on the currency law, a remnant of the gold standard. This law necessitated that 70% of exported currency be backed with gold and foreign currencies to control the dinar supply through government spending. After the Iran-Iraq War, the currency law was abolished, disturbing the balance between the supply and demand of foreign currency with increased military and civilian government spending.

The government allowed the private sector to directly import goods from producers and sell them at prices that were not subject to its control. Thus, there were two exchange rates: an official rate that maintained the $3.30 price and was used for official expenses, and a parallel rate determined by the supply and demand of foreign currency. The difference between the two rates widened in the wake of the economic embargo on Iraq in 1990. As a result, the parallel exchange rate rose to 3,000 dinars at points.

After the occupation and after the export of Iraqi oil was allowed again and deposits were unfrozen, Iraq was expected to undergo monetary reform, whereby surplus banknotes would be withdrawn from circulation. However, it used the daily currency auction, in which specific amounts of dollars are sold to the banks and the private sector to meet the domestic demand for foreign currency, especially for the purposes of importation. The steady increase in oil revenues led to a gradual improvement in the exchange rate until it reached 1,220 dinars to the dollar.

Many politicians and analysts believe that the daily currency auction is a way to smuggle the dollar through private banks under the pretext of importation, and their criticism has increased in light of the current financial crisis.

The question asked by those concerned in Iraq is: Does the daily currency auction have to continue despite the claims made about it? Or should we abandon it and turn to other means so that the process of buying and selling the dollar is free, without restrictions, as some suggest?

Choosing the appropriate exchange rate for any state is a critical scientific process that depends on the state’s economic and financial situation as well as its economic ideology. The states that choose a free floating exchange rate for its currency and make its buying and selling a free process without restrictions are usually powerful, developed economies that have important and multiple foreign currency sources and currencies of importance in international trade and investment flows, as well as large reserves of international currencies.

To preserve the exchange rate, a country that pegged its currencies to a foreign currency such as the dollar or to a currency basket has two options. The first is to have large foreign currency and gold reserves to support the pegged exchange rate when necessary, as the GCC countries do. The second is to maintain the exchange rate through the management of the monetary authority, which influences the factors determining the demand for foreign currency. This is what Iraq was doing prior to the first oil boom.

Presently in Iraq, the government does not have an official Iraqi dinar to dollar exchange rate, or a currency basket. The $3.30 exchange rate is no longer used for any currency, although it has not been officially canceled.

Accordingly, in light of the limited foreign currency resources and difficulty to go beyond oil resources, it is imperative that the state manages the current exchange rate through the development of a foreign exchange budget by the Central Bank, which will determine the allocation of imported goods, services and transfers without charges.

This way, it is possible to maintain the current exchange rate's stability and to limit expenditures in foreign currency to the available resources until the circumstances are favorable for monetary reform and the adoption of an appropriate official exchange rate.