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A statement issued by the Central Bank of Iraq regarding the exchange rate adjustment

Dec 21, 2020

A statement issued by the Central Bank of Iraq regarding the exchange rate adjustment

 

During the last months of this year, intense deliberations took place with the Prime Minister, the Minister of Finance and the Legislative Authority, regarding the general economic situation and the financial crisis that the public finances are going through due to low oil prices and production, and the economic and health challenges. The Board of Directors of the Central Bank held a number of meetings, some of which hosted the Minister of Finance for the same purpose. The Central Bank of Iraq would like to show the following:


1- The structural distortions in the Iraqi economy impoverished public finances and restricted the ability of reform sought by the government and the Ministry of Finance. It is not a coincidence that the financial situation is this bad, nor is it the result of the current or the previous year, but unfortunately it took root more than a decade and a half ago due to the political leadership of the economy and the preference for political thinking and the priorities of politicians over economic thought and development priorities and the rules of the relationship between economic policy on the one hand and fiscal and monetary policy On the other hand ... the fiscal policy lagged behind, and the monetary policy was busy repairing the outputs of the confused fiscal policy.


2- The subordination of the economic and financial policy to the aspirations and concerns of politicians resulted in the last acceptable models of financial management in Iraq, and the role of that administration was limited to the distribution of oil resources to life-sustaining requirements such as salaries and operational requirements, and the Ministry of Finance did not address its roles and leadership in economic affairs. In addition to the fact that it lacked many economic and financial information that could facilitate it and the decision-maker in the country to direct short and medium-term goals. This calls for an active approach to build economic and financial databases that facilitate decision-making and serve forecasts. 3- Because of all these conditions, the Central Bank had no choice but to intervene on more than one occasion to support public finances and save critical public spending requirements .. However, this does not mean that these interventions remain open without restrictions or endings.


4- On the other hand ... the Central Bank understands the difficulties facing the reform intentions that the government is intending to undertake, but this does not prevent any steps that the monetary authority can take with effective steps to carry out reforms that inevitably affect the institutions of the financial authority, especially the effective collection institutions. Customs, taxes, and other public collection institutions, and that spending be leaned and rationalized, all of which depends on the political will of the supreme state institutions that support the direction of the financial authority to achieve this. The government needs to support the vulnerable groups that will inevitably be directly affected, especially by any measure to change the exchange rate.


5- The legislative authority will have an important role in supporting the direction of the Central Bank to adjust the foreign currency exchange rate, as failure to take such a decision may make us forced to take difficult decisions that may put Iraq in a situation similar to what happened to neighboring countries. It should also be emphasized here that this change (reduction) in the value of the Iraqi dinar will be one-time only and will not be repeated, and the Central Bank will defend this price and its stability with the support of its foreign reserves, which are still at solid levels that enable it to do so.


6- The financial crisis that Iraq was exposed to due to the Corona pandemic and the resulting deterioration in oil prices and the decline in oil revenues, this led to a large deficit in the general budget and forcing the Ministry of Finance to borrow from banks and re-deduct them with the Central Bank in large sums, in order to pay salaries And meeting other spending needs related to services provided to citizens, and the continuation of the current exchange rate, which is not in any way commensurate with the rates of exchange rates in other countries, has become a major obstacle to conducting real development and enhancing competitiveness for local production, which prompted the Central Bank to think seriously about responding to financing requirements. Budget at the exchange rate that allows providing adequate resources to cover these needs and ensure the smooth payment of salaries and the critical requirements of government spending, and in order for the bank to avoid depleting its foreign reserves, which represent the main financial leverage for monetary stability in Iraq, And his keenness to support the public finances, as he is the advisor to the government and responsible for keeping its accounts.


Based on the foregoing, the Central Bank of Iraq decided to amend the foreign currency exchange rate as follows:


1450 dinars per dollar The price of buying foreign currency from the Ministry of Finance
1460 dinars per dollar The price of selling foreign currency to banks
1470 dinars per dollar The price of selling foreign currency to the public
asking God Almighty He is the most gracious to take into the hands of our country and our people because of the goodness, generosity and honor that it contains.


The Central Bank of Iraq,
December 19, 2020

Edited by DWS112
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JMO -

A devalue of the exchange rate was a possibility according to the White Paper:

Whiteboard 27 Nov 2020 

 

 4- اعادة النظر بسعر الصرف (الدينار مقابل الدولار ) مع دراسة أمكانيه المضي بخطوات حذف الاصفار على ان تصاحب هذه الاجراءات ما يلي:-  أ- منح مخصصات تضخم للدرجات الوظيفية (من الدرجة الخامسة الى الدرجة العاشرة) والمتقاعدين وشبكة الحماية الاجتماعيه بنسبة (12%) لتقليل اثر التضخم المحتمل على الطبقات الهشة في حالة تغير سعر الصرف.  ب- تعديل آلية بيع العمله للحفاظ على العمله الصعبه في داخل البلاد» وان يجري بيع وتداول الدولار والعملات الاجنبيه الاخرى مباشرة في اسواق العملة او من خلال سوق الاوراق الماليه لكي نحصل على سعر حقيقي للدينار العراقي مقابل الدولار الامريكي؛ وان يكون الضامن للاسعار هو قيمة الاحتياطي المتوفر لدى البنك المركزي العراقي من العملة الصعبة.  ت- وضع منهاج استيرادي وايقاف بعض الاستيرادات غير الضروربة وضبط المنافذ الكمركية ودعم نظام الضرائب واعفاء المنتج المحلي من ضرببة الدخل لمدة سنتين.

Page 7

ث- قيام الدولة باستيراد المواد الغذائية والتجارية الحيوية للاسواق وضخها ضمن
برنامج الحصة التموبنية في حالة ارتفاع أسعارها.

ج- الحفاظ على اسعار صرف الدولار من خلال ريط جميع مكاتب وشركات الصيرفة
بنظام الكتروني مركزي و يفرض على المكاتب والشركات استخدام شاشة تبين سعر
الصرف. ويتم تغذية الشاشة بالمعلومات من النظام المركزي؛ ويتم فتح حساب
مصرفي لكل شركة او مكتب بحيث يتم الايداع بالدينار العراقي من قبل تلك
الشركات والمكاتب مباشرة وبتم استلام مقابلها بالدولار الامريكي حيث يتم تغذية تلك
الحسابات من قبل البنك المركزي بعد الايداع بالدينار العراقي» و بذلك نحجم نافذة
بيع العملة الحالية.

ح- تفعيل دور الامن الاقتصادي ودخول الاجهزة الحكومية المختصة لضبط الايقاع
النقدي في سوق العملة واسواق بيع المواد الغذائية.

 

Translation:

 

4- Reconsidering the exchange rate (dinar against the dollar) with a study of the possibility of proceeding with steps to delete zeros, provided that these procedures are accompanied by the following: - 

A- Granting inflation allocations for job grades (from the fifth to the tenth degree), retirees and the social protection network by (12%) To reduce the impact of potential inflation on the fragile classes in the event of an exchange rate change. 

B- Amending the currency sale mechanism to preserve the hard currency inside the country; and that the sale and circulation of the dollar and other foreign currencies take place directly in the currency markets or through the stock market in order to obtain a real price of the Iraqi dinar against the US dollar; And that the guarantor of the prices is the value of the hard currency reserves available at the Central Bank of Iraq. 

C- Establishing an import program, stopping some non-urgent imports, controlling customs ports, supporting the tax system, and exempting local products from the income strike for a period of two years.

page 7

W - the state to import vital food and commercial materials to the market and pump them within
The ration program, if its prices increase.

C- Maintaining the exchange rates of the dollar by linking all banking offices and companies
With a central electronic system, offices and companies are required to use a screen that shows a price
Exchange. The screen is fed with information from the central system; And an account is opened
A banker for each company or office, so that the deposit in Iraqi dinars is made by those
The companies and offices are directly received and received in exchange for them in US dollars, where these are fed
Accounts by the Central Bank after depositing in Iraqi dinars; thus, we size the window
Sell the current currency.

H- Activating the role of economic security and entering the competent government agencies to control the rhythm
Cash in the currency market and the foodstuff markets.

Edited by DWS112
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1 hour ago, DWS112 said:

a study of the possibility of proceeding with steps to delete zeros,

Haven’t they studied this to death already???!!!

The 1460 rate makes it .00068, delete those zeros and we have .68¢ which I am more than happy to take. I really hope they get on with it and just do it already ...   :rocking-chair:

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1 hour ago, DWS112 said:

Amending the currency sale mechanism to preserve the hard currency inside the country; and that the sale and circulation of the dollar and other foreign currencies take place directly in the currency markets or through the stock market in order to obtain a real price of the Iraqi dinar against the US dollar

 

The "real price"....is that too difficult?

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29 minutes ago, Half Crazy Runner said:

Haven’t they studied this to death already???!!!

The 1460 rate makes it .00068, delete those zeros and we have .68¢ which I am more than happy to take. I really hope they get on with it and just do it already ...   :rocking-chair:

wouldn’t they of just moved it from .0008 to .68 then? They just devalued by 22%, they could of increased its value by 22% or 500% or whatever. The only reason to move in increments of 1000 is if it’s a redenomination, old 25k note is same as new 25 note. I’ve been in this sine 08 and remained optimistic but I’m having a hard time seeing a happy ending with this move ugggh. Hoping the Iraqi citizens won’t stand for this

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1 hour ago, Half Crazy Runner said:

Haven’t they studied this to death already???!!!

The 1460 rate makes it .00068, delete those zeros and we have .68¢ which I am more than happy to take. I really hope they get on with it and just do it already ...   :rocking-chair:

They’ve buried it, dug it up, rehashing the already rehashed hash, buried it again at least a dozen times in the last 10 year’s; and now dug it up for further rehashing 

Not even birds chew their food this many times before giving it to their young’uns.


:facepalm2:

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1 hour ago, horsesoldier said:

They’ve buried it, dug it up, rehashing the already rehashed hash, buried it again at least a dozen times in the last 10 year’s; and now dug it up for further rehashing 

Not even birds chew their food this many times before giving it to their young’uns.


:facepalm2:

Unbelievable,  right!?!   Ground hog day over there. I still have hope though....lol

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14 hours ago, mally2 said:

wouldn’t they of just moved it from .0008 to .68 then? They just devalued by 22%, they could of increased its value by 22% or 500% or whatever. The only reason to move in increments of 1000 is if it’s a redenomination, old 25k note is same as new 25 note. I’ve been in this sine 08 and remained optimistic but I’m having a hard time seeing a happy ending with this move ugggh. Hoping the Iraqi citizens won’t stand for this

A lot of people are speculating that they devalued it to force Iraqis to panic and trade in their dinars, thus, less dinars out there when they rv 

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They sell oil in USD. So now that they devalued dinar, they will have more dinar from the same oil sales therefore they will have more money to spend, since wages will not be going up 20% and same with pensions. Now iraq government will have more money to play with due to this devaluation of dinar. Unless of course inflation kicks in and prices go up drastically, but even then they will keep wages and pensions as low as possible.

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I just don't get it. when the rv comes, all dinar investors ( outside of iraq ) will exchange dinars for dollars in the us, and old dinars will be put back in us federal reserves period, and the most important is old dinars will not be returned back to cbi cash reserves in iraq. If old dinars won't be returned back to cbi in iraq, then what has the cbi gotten to lose? Because the cbi cash reserves will not lose even 1 dinar. Why hasn't cbi pushed the rv botton in almost 17 years? What are they waiting for? Eventhough iraq already devalued the iqd to 1450, actually that devaluation thing hasn't gotten something to do with pushing the rv botton as long as the old dinar will not be returned to cbi cash reserves. And the governor of cbi can just announce the date ( like today or tomorrow ) and the rate ( let's say 1 iqd=3.23 us or $5.26 us). If the cbi want to announce that 1 iqd=3.22us or $5.26us ( this rate is just an example , not a real rate ) is also very possible, because the cbi cash reserves will not lose even 1 dinar and all dinar investors have to exchange dinars for dollars outside of iraq, not inside of iraq, that's why actually cbi has got nothing to lose at all, not even 1 dinar. I hope i was wrong. What do you folks think?

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If i say if ( i know some people will disagree with me, that's why this is just my assumption.) when the rv comes, then all dinar investors have only 1 choice that all dinar investors can only exchange dinars for dollars at any banks inside of iraq. Then before the cbi will announce the rv, the cbi might check and double check their dollar cash reserves to make sure there is a lot monies to cover for rv. In addition to that, the cbi will also calculate very very carefully to determine the rate to make sure their dollar cash reserves are more than enough to cover for rv. The lastly, the cbi will also calculate the total number of dinars outside of iraq that the cbi will suck them in , so when the cbi announce the rv , then their dollar cash reserves are more than enough to cover for rv. The point is if the dinar investors can only ( have no other choices ) exchange dinar for dollars inside of iraq, then that's why the cbi hasn't announced the date and the rate in almost 17 years because iraq has a cash flow/money problem, therefore iraq doesn't have enough to pay for monthly salaries, etc. If iraq has a cash flow problem, then do you folks think iraq can announce the date and the rate for rv? Again, I know some people will disagree with me. I hope i was wrong. What do you folks think about this? 

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Sorry folks. I amn't trying to be outsmart to others and i amn't trying to discourage the dinar investors either. No offense to everyone. But i am just trying to think to find one good reason why iraq hasn't announced the rv in almost 17 years. Actually, i still prefer to exchange dinar for dollars in the us ( outside of iraq ), but i still can't figure out the reason behind delaying to push the rv button if we all can exchange dinars for dollars in the us folks. The one big question is, what are they waiting for? Is malaki the person behind delaying the cbi  to push the rv button? If not malaki, then who else is behind delaying to push the rv button? Hopefully, rv comes sooner and closer folks.

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18 minutes ago, rvmydinar said:

Sorry folks. I amn't trying to be outsmart to others and i amn't trying to discourage the dinar investors either. No offense to everyone. But i am just trying to think to find one good reason why iraq hasn't announced the rv in almost 17 years. Actually, i still prefer to exchange dinar for dollars in the us ( outside of iraq ), but i still can't figure out the reason behind delaying to push the rv button if we all can exchange dinars for dollars in the us folks. The one big question is, what are they waiting for? Is malaki the person behind delaying the cbi  to push the rv button? If not malaki, then who else is behind delaying to push the rv button? Hopefully, rv comes sooner and closer folks.

Let me ask you this? Why are you trying to figure out something you have zero control over and never will? Just sit back. Relax. Smoke a joint and wait for Adam’s text! I don’t worry about any of this crap. I also NEVER try to figure it out. You never will!! It’s Iraq! 

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18 minutes ago, Jaygo said:

Let me ask you this? Why are you trying to figure out something you have zero control over and never will? Just sit back. Relax. Smoke a joint and wait for Adam’s text! I don’t worry about any of this crap. I also NEVER try to figure it out. You never will!! It’s Iraq! 

Thanks for the good advice. Good point. I like the way you said. It makes more sense. You are right this is iraq.

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“The Central Bank had no choice but to intervene on more than one occasion to support system" rel="">support public finances and save critical public spending requirements .. However, this does not mean that these interventions remain open without restrictions or endings.”

 

The devaluation of dinar by 22% is a temporary fix. In my opinion less than 12 months.
It will help to create liquidity 

It will help to collect chunky money 

It will help to reduce the monetary mass

It will help to increase financial inclusion 

 

This temporary fix only works for the government not the citizens.

 

 

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50 minutes ago, Laid Back said:

“The Central Bank had no choice but to intervene on more than one occasion to support system' target='_blank' style=" rel="">support system" rel="">support public finances and save critical public spending requirements .. However, this does not mean that these interventions remain open without restrictions or endings.”

 

The devaluation of dinar by 22% is a temporary fix. In my opinion less than 12 months.
It will help to create liquidity 

It will help to collect chunky money 

It will help to reduce the monetary mass

It will help to increase financial inclusion 

 

This temporary fix only works for the government not the citizens.

 

 

LB did you see the article out this morning already where prices have already gone up in the market from 10-20%!! So the dinar has devalued by 22% and inflation has gone up just for food close to the same! So are you saying the citizens will allow this to go on for up to a year? Inflation will go through the roof long long before then there is no way they can keep this rate low for even a month IMO!!

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6 minutes ago, Dinarrock said:

So are you saying the citizens will allow this to go on for up to a year? Inflation will go through the roof long long before then there is no way they can keep this rate low for even a month IMO!!

You’re absolutely right. I’ve already seen the pics of Iraqi citizens protesting this mess by setting tires on fire in the street. This has only been 2 days, I can’t imagine them putting up with this rate for a whole year without the violence escalating. 

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It won’t last two weeks again I say by Jan 6th at the latest guess we shall see soon enough! The citizens are getting double hit with the devaluation and then the instant inflation so the liquidity issue and giving the government more cash in the short run will be short lived!!!

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24 minutes ago, Half Crazy Runner said:

You’re absolutely right. I’ve already seen the pics of Iraqi citizens protesting this mess by setting tires on fire in the street. This has only been 2 days, I can’t imagine them putting up with this rate for a whole year without the violence escalating. 

Ok

i will help

i need a camal

and some type of turbin

sandals 

I go undercover and really fire them up

i will be a marter for my dv friends 

 

but will burn everything till govt wants to deal

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1 minute ago, Snatcher said:

I don't know why but every time someone says they've been here since such and such time I always check when they join site. Says you joined January 2017?

Why would that matter? I’ve held Dinar since 2007 but didn’t find Dinarvets until 2010. Didn’t join until I think 2011. (Check me on that. I know you will.) Why does that matter? 

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