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Al-Alaq: The devaluation of the dinar should not be the first line of defense to confront the financial crisis


Mary B
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Al-Alaq: The devaluation of the dinar should not be the first line of defense to confront the financial crisis
 
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Central Bank Governor Ali Al-Alaq
 
 
 

The Economy News - Baghdad:

The Governor of the Central Bank of Iraq, Ali Al-Alaq, stressed that the devaluation of the dinar against foreign currencies should not be the first line of defense to confront the financial crisis and bridge the budget deficit.

In a letter addressed to the former Assistant Secretary-General of the League of Arab States, Legal Adviser to the Prime Minister, Dr. Fadel Muhammad Jawad, and obtained by Al-Iqtisad News, Al-Alaq said that “by virtue of the central bank’s responsibility for monetary policy, the study and review of the exchange rate is an ongoing matter from Before formations of the bank and its board of directors based on in-depth studies that take into consideration all factors and variables, "noting that" the exchange rate is not a sacred matter so that it cannot be compromised. "

He added that "the devaluation of the dinar against foreign currencies should not be the first line of defense, nor should it be a means to bridge deficits, shortcomings and failures in the performance of other financial, commercial, investment, tax and customs policies", explaining, "easy solutions that achieve financial value should not be used Limited at the expense of damage to all segments of society caused by inflation, especially the fragile and poor segments. "

He stressed that "we note the inaccuracy of the (some) account of the reduction achieved by the dinar from resources to the public budget, as the correct calculation is that we subtract from the total dollar revenues the share of oil companies, which amounts to 14 billion dollars annually and the payment of debts, interest and external liabilities amounting to more than 5 billion Dollars, in addition to the equipment and materials imported by the government, such as oil derivatives, ration materials, etc., the net of this amount strikes at the new price of the dinar, ”noting that if the dinar’s value is reduced to 1500 dinars per dollar, what the Ministry of Finance gets from the difference is 5 trillion dinars.  

He noted that "the devaluation of the dinar against the dollar will lead to protection and stimulation of the local product is something that many notes suffer because this measure is used by some countries to encourage exports and in the case of Iraq the goal is to provide ingredients to stimulate domestic production and protect it from dumping policy practiced by exporting countries, especially neighboring countries, This goal will not be achieved by reducing the value of the dinar because the price difference is because of the dumping policy or because of the depreciation of the currency of these countries in a very large way. "

Al-Alaq called for controlling random imports and stopping dumping policy through controlling border crossings, as the number of informal border crossings is more than official and strict application of customs duties is an effective application of laws to protect the product and the consumer and anti-dumping.  

 

 

Number of views 104   Date added: 19/06/2020

http://economy-news.net/content.php?id=20770

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1 hour ago, Mary B said:
Al-Alaq: The devaluation of the dinar should not be the first line of defense to confront the financial crisis
 
4248.jpg
Central Bank Governor Ali Al-Alaq


Great Find Mary ! ;) 

 

 

Here It Is After CNN’s ‘Pimp My Ride’ ! :o 

 

:D  :D  :D 


 

LINK

Al-Alaq: The devaluation of the dinar should not be the first line of defense to confront the financial crisis

 

4248.jpg
 

19th June, 2020
 

The Governor of the Central Bank of Iraq, Ali Al-Alaq, stressed that the devaluation of the dinar against foreign currencies should not be the first line of defense to confront the financial crisis and bridge the budget deficit

In a letter addressed to the former Assistant Secretary-General of the League of Arab States, Legal Adviser to the Prime Minister, Dr. Fadel Muhammad Jawad, and obtained by Al-Iqtisad News, Al-Alaq said that “by virtue of the central bank’s responsibility for monetary policy, the study and review of the exchange rate is an ongoing matter from Before formations of the bank and its board of directors based on in-depth studies that take into consideration all factors and variables, indicating that" the exchange rate is not a sacred matter so that it cannot be compromised

He added that "the devaluation of the dinar against foreign currencies should not be the first line of defense, nor should it be a means to bridge deficits, shortcomings and failures in the performance of other financial, commercial, investment, tax and customs policies", explaining, "easy solutions that achieve a financial value must not be used Limited at the expense of damage to all segments of society caused by inflation, especially the fragile and poor segments

He stressed that "we note the inaccuracy of the (some) account of the dinar reduction achieved from resources to the public budget, as the correct calculation is that we subtract from the total dollar revenues the share of oil companies, which amounts to 14 billion dollars annually and the payment of debts, interest and external liabilities amounting to more than 5 billion Dollars, in addition to the supplies and materials imported by the government, such as oil derivatives, ration materials, etc., the net of this amount hits the new price of the dinar, ”noting that if the dinar’s value is reduced to 1500 dinars for every dollar, the difference that the Ministry of Finance obtains from the difference is 5 trillion dinars

He noted that "the devaluation of the dinar against the dollar will lead to protection and stimulation of the local product is something that many notes suffer because this measure is used by some countries to encourage exports and in the case of Iraq the goal is to provide ingredients to stimulate domestic production and protect it from dumping policy practiced by exporting countries, especially neighboring countries, This goal will not be achieved by reducing the value of the dinar because the price difference is because of the dumping policy or because of the depreciation of the currency of these countries in a very large way

Al-Alaq called for controlling random imports and stopping dumping policy by controlling border crossings, as the number of informal border crossings is more than official and strict application of customs duties is an effective application of laws to protect the producer, consumer and anti-dumping

Edited by DinarThug
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3 minutes ago, Mary B said:

Thanks DT


Ur Welcome Chick ! ;) 

 

 

And Here’s An Economists Break Down And Take On The Article ! :o 

 

:D  :D  :D 

 

 

On the Central Bank of Iraq report devoted to maintaining the value of the dinar against the dollar

8-1591642220.jpg
 
 

Written by: Dr. Imad Abdul Latif Salem

 

 

This report, tagged with "Reducing the Iraqi dinar exchange rate, determinants and alternatives" (issued by the Central Bank of Iraq), begins by emphasizing that devaluing the local currency DEVALUATION has a different meaning in the rest of the world, compared to Iraq.

This "reduction" means (in the rest of the world): "Reducing the official exchange rate of the local currency against an international reference currency, so that the number of units of foreign currency that can be obtained against a unit of the national currency decreases. As for Iraq, this is intended to reduce The value of the Iraqi dinar against the US dollar .. It differs from the low exchange rate DEPRECIATION subject to the mechanism of supply and demand in the market "!!!!.

What is the difference between the two cases exactly?
I swear to you that I do not know what the difference is ... and there is absolutely nothing wrong with this "confession".

All that I was able to understand from this premise mined in "complex" concepts ((and with a limited mind as a mind)) is that there are those who demand the central bank to devalue the "Iraqi" dinar, against the value of the "American" dollar .. so does the central bank have to do that ? The answer is, of course.
Do you accept that the central bank do that? The answer is: No, of course .. A thousand no.

And over a period of 14 pages, which is the full size of the report, the Central Bank does not tell us what the role of monetary policy is in the current circumstances, nor does it provide us with any assistance to get out of the catastrophic crisis that we are discussing, resolving and marshing now.

He only talks (and for 13 pages) about "determinants" .. As for "alternatives", they only exist in the second half of page 14 (and the last) of the report.

These "alternatives" from the bank's point of view summarize what "others" must do, and not what the central bank can do as well, to help overcome the current plight of Iraq (and not of course, in playing the full role).

This report reviews all the failures, the chronic structural imbalances in the economy, the mismanagement of the economic file .. and this is all borne by the “others”, and its consequences are borne by many other bodies, the most important of which is the Ministry of Finance (which is unfortunately for them, and only the general public knows) .. As for It is (i.e. the central bank), as the main role was played: achieving foreign reserves of $ 70 billion ... and maintaining an inflation rate ranging from 2.O 3.0% - (which is better than the prevailing rate of inflation in the United States of America) .. and all This has already been achieved, but without indicating the feasibility of this in a country where the “official” unemployment rate is 12% (excluding underemployment) .. and about 40% with it.

What about the main role of economic policy (including monetary policy) in achieving a sensitive "trade-off" between inflation and unemployment in a country like Iraq?
Well .. we do not know anything .. so why did the central bank not tell us (in this report), what can it do, in front of everyone (other than him) unable to provide solutions?

In the report, we clearly see something of “populism”, which we should not beg to defend our “method” of preserving the value of the dinar against the dollar (and not from the exchange rate policy currently adopted by the bank, according to the distinction mentioned in the introduction to the report). On many pages of the report, it is frequently referred to as an "axiom" that is not disputed, neither by the simple people, nor by the economic elites (with their enormous mental potentials and superpowers).

And this populist - self-evident "discourse" is: O poor people, poor employees, poor pensioners, beneficiaries of scarce social welfare benefits ... be careful .. any attempt to reconsider the exchange rate of the dinar against the dollar will make you (you In particular, and not others), you pay a very high price ... and the consequences for that will be on you (and not on others) ... very dire .. and you and your families can die of hunger !!!!!.

When we write what we are writing here now, we are not naive to call for "float" .. nor "criminals" to demand action in the notorious "shock" method ... nor "traitors" to defend extinction before the "features" of the IMF .. Rather, we believe that It is time now, and indeed it is necessary now, for the central bank to study proposals related to the necessity of working (gradually) with a realistic, "managed" exchange rate, and calculated accurately, so that the effect of the "new" exchange rate is less harmful, and costly, on fragile groups. From the population .. It is also a truism to know that there is no decision without "costs", and no policy without "returns".

The most important arguments of the central bank in its defense of the "sanctity" (value) of the current Iraqi dinar against the value of the US dollar is the argument (or factor No. 1) mentioned on page 3 of the report.

This "Factor 1" deals with the state of the external sector "Balance of Payments". Although the report acknowledges the “rentier” of the Iraqi economy, its unilateralism, its strong openness to the outside, and its chronic structural imbalance, which extends from previous decades ago, it nevertheless affirms that Iraq has a “strong position in its external sector”, and this appears Obviously through the "adjusted current account surplus", and through the adequacy of the foreign reserves of $ 70 billion.

And Iraq "does not suffer from a balance of payments deficit" (without saying that this is very normal, because Iraq is still exporting oil with a value greater than all imports).

However ... despite all of that, the report presents to us on page 10 of it a table that deals with the effect of reducing the dinar's "exchange rate" against the dollar, at the main doors of the state's general budget, and assumes two rates of reduction, 10% and 20%, to show the effect of "reduction" On the public budget in both cases.

This table is based on the State’s general budget data for the fiscal year 2019 , and on the data of the “estimated” general budget project for 2020..and relying on an exported oil price of $ 56 per barrel, and an average export rate of 3,880 barrels per day .. is this reasonable, acceptable, in A report issued by the most important economic institution, is the institution that monetary policy in Iraq ??

Is it reasonable and acceptable for the report to say (on page 4 of it) that “the adjusted current account achieved a surplus of 5.75% of GDP in 2019, and is expected to continue in 2020 and beyond” !!!!!.

How were these "future" expectations built with this degree of confidence, contrary to the expectations of all economic experts, throughout this world, including those of international economic organizations ??.

Finally ...
the central bank has always been the school where it worked, and graduated from, the best experts, professors, and economists in Iraq.

So we hope that no one will donate to defend this report, or to attack the criticism directed against it.

This report was a sincere and noble effort to defend monetary policy, and it was and will remain, and in all countries of the world, a subject of controversy and permanent disagreement between its main parties, namely: stakeholders, policy makers, political leaders, those interested in economic affairs, and those involved in general economic policy.

We are not in a fight (or war) with each other.
We all belong to Iraq, we search, and work together, in the interest of this Iraq .. before any other consideration.

LINK

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10 minutes ago, DinarThug said:

The Governor of the Central Bank of Iraq, Ali Al-Alaq, stressed that the devaluation of the dinar against foreign currencies should not be the first line of defense to confront the financial crisis and bridge the budget deficit

 

 

As as long as they keep the Dinar away from cold water they shouldn’t have any shrinkage or devaluation.  😆 

 

3C4C4318-D000-4902-A9A6-5B4877096B84.gif.6ff82afc6c01eb16e5d9a84ecca8f4a6.gif

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10 minutes ago, Mary B said:

Disclosure of a reason why it is not allowed to impose deposits on what the Central Bank sells

site won't allow to copy, check link

 

124954.jpg?watermark=4

 

https://baghdadtoday.news/news/123242/الكشف-عن-سبب-يحول-دون-ال


And Here’s The Full Version Of Ur CBI Article In The Other Thread ! ;) 

 

 

With Some Possible Enhancement ‘Glam’ ...

 

:D  :D  :D 

 

 

Disclosure of a reason why it is not allowed to impose deposits on what the Central Bank sells 

 

124954.jpg?watermark=4
 

Economie 06/1920 2020 12:26 271 Editor: am   


Baghdad today - Baghdad 
 

Member of the Parliamentary Finance Committee, MP Faisal Al-Issawi, on Friday (19 June 2020), set a legal condition for imposing deposits on what the Central Bank sells in hard currency.

Al-Issawi said in an interview with (Baghdad Today), that "imposing deposits of 5% on what the central bank sells of hard currencies comes within the doors of solutions to the financial crisis, but it needs to be amended in the law of the central bank and tax together." 

He added: "I do not expect that there will be a possibility to amend any of the central bank and tax laws at this critical time."

The deputy, Mohamed Shiaa Al-Sudani, had suggested imposing deposits of 5% on what the Central Bank sells of money, as one of the means that alleviates the financial crisis, while he indicated that going in this direction would save billions per month. 

According to the proposal submitted by the Sudanese, "the importer will have to leave 5% of the amount he buys from the central bank in dollars, for import, before returning the amount to him after bringing in receipts proving his payment of taxes and customs duties."

He added: "We have a solution imposed by the government of Abadi , which was going through the same current circumstances to offset salary deductions, a tax of 5 % on the dollar amount sold in the auction of the currency, which go for imports." 

He pointed out that "this measure we implemented for a period of 45 days, and we obtained in the government of Abadi, 500 billion dinars, which is equivalent to deductions for employees monitored in the government of Mustafa al-Kazemi."

Iraq suffers from a financial crisis, which was experienced by the new Corona virus pandemic, which caused the suspension of economic activities and low oil prices globally, which made Iraq, at times, heading to cut the salaries of employees and retirees, and another that drew attention to internal or external borrowing.

LINK

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3 hours ago, DinarThug said:

It is time now, and indeed it is necessary now, for the central bank to study proposals related to the necessity of working (gradually) with a realistic, "managed" exchange rate, and calculated accurately, so that the effect of the "new" exchange rate is less harmful, and costly, on fragile groups.


No, it’s way past time for “studying proposals”  It’s time to take action. Get a move on, yahoos!:butt-kicking:

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8 minutes ago, Laid Back said:

There you have it, from the horse mouth.

 

“The devaluation of the dinar should not be the first line of defense to confront the financial crisis“


What about a Revaluation Mr. Al-Alaq?

 

Go RV

Go $1:1

Yeah !!! Particularly since the price of oil is up to where all can make some profit ? Including Iraq on a revaluated currency .

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5 hours ago, Thief said:

 

" we are not naive to call for "float" .. 
(so Kaperoni is naive? 😮😯😅

 

 nor "criminals" to demand action in the notorious "shock" method ... 
    Rate 'shocks' is a term used to describe when the value of one currency spikes relative to another in an extremely short period of time (like an RV?) 🤔🤔🤨🙃

 

nor "traitors" to defend extinction before the "features" of the IMF .. 
~ they are not going to defend IMF shortcomings ( in the Fund's advice on exchange rate policy) as this could lead to serious implications or extinction of their own currency. 

 

Rather, we believe that
- It is time now, and indeed it is necessary now, for the central bank to study proposals related to the necessity of working (gradually) 
- with a realistic, "managed" exchange rate, 

- and calculated accurately

- so that the effect of the "new" exchange rate is less harmful, and costly, on fragile groups. From the population ..

 

It is also a truism to know that there is no decision without "costs", and no policy without "returns

 

 

In summary: 

 

- Devaluation is out. 

- And all they are asking for is the "new" exchange rate must be realistic and and calculated accurately

 

A demand for notorious shock ( value of currency spike) would be too much to ask for. But of course they are not rejecting it either. 😜😅😊

 

:reading-newspaper:

"there is no decision without "costs", and no policy without "returns"  🍹

 

:twothumbs:

Excellent summary 

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