Monetary stability and exchange rate liberalization.

[RJG]

Monetary stability and exchange rate liberalization.

Economic  2025/08/31

 

Mohammed Sharif Abu Maysam 

In economic feasibility studies, the financial, marketing, and technical studies cannot be prepared in an investment environment unless that environment enjoys monetary stability, paving the way for stable exchange rates for the local currency against foreign currencies. This allows the economic feasibility researcher—particularly the foreign investor—to calculate costs, returns, and profits over the time periods within the project's lifetime.

 This means that monetary instability can be a factor that repels investment capital, even if the investment environment is promising. Therefore, monetary authorities, through their available tools, seek to achieve the goal of monetary stability and reassure investors and those preparing economic feasibility studies, with stability that makes the margin of error in forecasts very small. This leaves it to the executive, legislative, and judicial authorities to establish attractive security, legal, and social environments through security stability and social acceptance, along with the presence of a legal system and judicial institutions that regulate and protect market relations on the one hand, and the relations of business owners with institutional and social formations on the other, in a manner that ensures integrity and integration with societal customs and traditions. 

Based on this and other factors related to the inflationary situation and its extension to the areas of growth rates and development, the local currency exchange rate and monetary stability have been among the priorities of the monetary authority in our country over the years of economic adaptation to the phase of the macroeconomic transition to a market economy in light of structural imbalances, the inability of productive sectors to finance domestic demand due to the disruptions of the transition phase and the internal influences related to financing foreign trade, and the growth of the black market for currency exchange.

After the country witnessed security stability, an increase in the level of services and sectoral growth rates, with a clear reduction in the circles of administrative slackness due to the introduction of technologies and electronic payment systems, in conjunction with measures to tighten control over border crossings, and transfer the mechanisms of foreign currency flow to finance foreign trade through the banking system, the rates of the dollar mass flow outward to the local market decreased, which was reflected positively in favor of the Iraqi dinar, and which bodes well for the black market exchange rate approaching the official exchange rate.

However, achieving monetary stability under the conditions of economic reform, which include the liberalization of the exchange rate, does not mean a decline in the black market exchange rate in favor of the official exchange rate. Rather, it means price stability in a market capable of financing aggregate demand at a point close to or identical to the official rate, with the possibility of maintaining this stability in the face of the many variables and transformations witnessed by the country and the region. In other words, achieving stability is conditional on the liberalization of the exchange rate, which favors the adoption of a managed float method, via a free market in which minor fluctuations in the exchange rate are permitted, while the monetary authorities intervene when necessary to support price stability in cooperation with the executive and legal authorities.

https://alsabaah.iq/119768-.html

[southbeach]

Well, they’re telling you that it’s going to happen, somehow.

[RJG]

However, achieving monetary stability under the conditions of economic reform, which include the liberalization of the exchange rate,  the CBI has been shouting economic reforms lately, well, now we know it includes the Exchange Rate freedom.

[RJG]

In other words, achieving stability is conditional on the liberalization of the exchange rate, which favors the adoption of a managed float method, via a free market in which minor fluctuations in the exchange rate are permitted, while the monetary authorities intervene when necessary to support price stability in cooperation with the executive and legal authorities.

 

They need stability for foreign investment.  If they make the moves to attract investment, I think it will be before the new year, so next year they can encourage more foreign investment.  Great article....  RJG

Edited September 1, 2025 by RJG

[RJG]

Iraq can attract new foreign investment as well as capture the chunky mattress money if they RV in the Fall.  Both of these opportuniites would bring in money into the banking system.  It seems to be a win win situation to me. 

[screwball]

8 hours ago, RJG said:

However, achieving monetary stability under the conditions of economic reform, which include the liberalization of the exchange rate,  the CBI has been shouting economic reforms lately, well, now we know it includes the Exchange Rate freedom.

soon

[Laid Back]

Iraq's economy is heavily dependent on oil exports, with oil providing a majority of the country's foreign exchange earnings. This makes the economy particularly vulnerable to fluctuations in global oil prices. A managed float exchange rate can be beneficial.

In a Transition to a diversified economy, a managed float can be a strategic tool in the long term goal of diversifying the Iraqi economy. It can provide a more predictable environment for domestic businesses to plan and grow, while also allowing the currency to gradually adjust to changing economic conditions as new industries develop. However, it's worth noting that Iraq has historically used a pegged or a closely managed peg system. The International Monetary Fund (IMF) and other organizations have often classified its exchange rate regime as a conventional peg or a closely managed arrangement, where the value is tied to a hard currency like the U.S. dollar to provide stability. The idea of moving toward a more liberalized "managed float" suggests a desire for greater flexibility while still retaining some control to avoid the pitfalls of a pure free float.

 

Go liberalization of the exchange rate 

Go stronger Dinar

Go purchasing power

[screwball]

54 minutes ago, Laid Back said:

Iraq's economy is heavily dependent on oil exports, with oil providing a majority of the country's foreign exchange earnings. This makes the economy particularly vulnerable to fluctuations in global oil prices. A managed float exchange rate can be beneficial.

In a Transition to a diversified economy, a managed float can be a strategic tool in the long term goal of diversifying the Iraqi economy. It can provide a more predictable environment for domestic businesses to plan and grow, while also allowing the currency to gradually adjust to changing economic conditions as new industries develop. However, it's worth noting that Iraq has historically used a pegged or a closely managed peg system. The International Monetary Fund (IMF) and other organizations have often classified its exchange rate regime as a conventional peg or a closely managed arrangement, where the value is tied to a hard currency like the U.S. dollar to provide stability. The idea of moving toward a more liberalized "managed float" suggests a desire for greater flexibility while still retaining some control to avoid the pitfalls of a pure free float.

 

Go liberalization of the exchange rate 

Go stronger Dinar

Go purchasing power

so when exactly did the zeros go on? sept ? end of or was it october?

 

[Laid Back]

6 hours ago, screwball said:

so when exactly did the zeros go on? sept ? end of or was it october?

 

Soon in the coming days, in the near future😂

[horsesoldier]

8 hours ago, Laid Back said:

Soon in the coming days, in the near future😂

Good thing we got that set in stone: I was beginning to become concerned 🤣