Central was able to overcome the side effects of currency

2/11/2015 0:00

BAGHDAD - Imad emirate
said a economic expert. Dr . Fadel Awad Ismail, that monetary policy in Iraq has achieved a significant decrease in the inflation rate for the period from 2010 to 2007. And it attributed the achievement to the efforts of the monetary authority in the recruitment of lifting the Iraqi dinar exchange rate against the dollar through foreign currency sale and purchase of the dinar in the exchange market foreign.

But moving the nominal exchange rate of the local currency (the dinar) administratively and continuously toward the highest against the dollar away from the fundamentals of the economy dinar to the calendar of the highest value market equilibrium and calendar dollar undervalued. As a result, the surplus in demand for the dollar, followed by a significant and prolonged decline in the Iraqi dinar exchange in the free market, starting from the first quarter of 2011 price coupled with higher inflation.

Explaining the Central Bank of Iraq's dependence on the ways in two major support of the Iraqi currency exchange rate, one directly represented in intervention in the exchange market to swap foreign currency (dollar) in local currency, and the other is directly based on the increase in the desire to retain financial assets (savings deposits) denominated in national currency and then recently added to them some of the administrative procedures for regulating access to foreign currency. Awad said he based revaluation of the exchange rate policy pursued by the Central Bank of Iraq since October 2003, to intervene Almstmervi exchange market's huge foreign exchange-based and employment on the sale of foreign currency (US dollar) and the purchase of the local currency.

He added that the central bank a day in the initial exchange market (referring to the lack of a future market for the currency or market options) and expresses its readiness to secure the display of foreign currency (dollars) to cover the need for demand to ensure the strengthening of the national currency and gradually to maintain stability at the target in each stage or period of revaluation ranges .

He said Fadel that the announcement of the central bank based on the week, the presentation currency at auction (though this term does not chime and meaning idiomatic for the auction because the latter means that the price, which is sold by monetary financial asset or not be pre-scheduled or be reached in negotiations) , but it identifies through a competitive process to participate in the open between the parties or open bidding for the price display let them bring forth a final price accepted by the seller. Which can not be achieved in the process of sale of foreign currency to the lack of competition and the presence of one price determined by the application of any of the Central Bank of Iraq, rather than deals in the open sale price of the dollar in advance with his willingness to sell any quantity of these foreign someone who takes to buy the currency.

He noted d. Awad this be the central bank is equipped with the quantity of foreign currency are sufficient to cope with purchases government and private banks licensed companies, remittance and exchange companies as the main actors procuring foreign currency per price of schedule by the bar.

He said: It follows that central bank intervention in the foreign exchange market either increase (purchase of foreign currencies) or low (sale of foreign currencies) international monetary reserves. And that's where purchases or sales of foreign currency are against the national currency, as this affects the cash basis (currency in circulation plus bank reserves).

And that if the low value of local currency more than they should or undervalued real value it buys this currency and pushes against which foreign exchange to reduce the quantity supplied them and raise the price to the desired level.

Conversely, if the local currency value too high any denominated Boktrmen real value will be on the central bank to intervene as a seller in exchange for purchase of foreign currencies to increase the quantity supplied them and cut its price to limit or desired range to it.

He said. Dr . Awad at the conclusion of his speech that in Iraq there is a belief that the Iraqi dinar denominated less than the actual value due to the large surplus in the balance of payments and the accumulation of international reserves. This central bank intervenes in the currency swap market as a seller and a buyer of the dollar the local currency exclusively. This feature has also derives its interpretation of the scarcity of private sale of foreign currency to the Central Bank of Iraq.