Support the local currency strengthens international role
Support the local currency strengthens international role December 9, 2015
There are strong economic convinced that the decline in Iraqi dinar exchange rate with a surplus in the balance of payments reflects the fact that the national currency undervalued real value, so there is an urgent need for action to raise the value of the dinar in the exchange market through direct and constant intervention of the Central Bank of Iraq to reduce the sale price The dollar against the dinar in the currency auction.
This form-oriented basis points in the direction of strengthening the exchange value of the dinar against the dollar, by taking administrative decisions in a row by the monetary authority, this argument completely intact from the point of economic analysis.
Within this academic-oriented confirmed d. Awad Fadhil according to (Center Brief Media) The importance of this road in the exchange rate management to be desirable high domestic inflation rate, and raise the value of national currency against the dollar from 2004 until the first quarter of 2010 was in line with the objective to be achieved, a stop rising in the general level of prices, and strive to reduce the rate of inflation at acceptable levels economically, but who got to the monetary authority continued in their approach to lift the value of the dinar against the dollar (ie reduce the value of the dollar denominated in dinars) after the decline in the rate of inflation and to control it and install the official exchange rate at a level may not not necessarily reflect the level of equilibrium in the market.
And when you return to economic indicators easily realize that increasing the degree of intervention in the exchange market and the persistent administrative move towards the low value of the dollar or the selling price was not officially compatible with macroeconomic fundamentals.
He explained d. Awad when devoting the vast proportion of resources in favor of current consumption with limited capacity in the absorptive INVESTING energy, low competitiveness of industries producing goods traded (except oil), and the tyranny of service activities and the acceleration of price levels and the high level of unemployment and the decline in the relative productivity of industrial and agricultural sector and high production costs All of this leads to the inhibitory effect on the development of the economy.
He said it was practically impossible that a single monetary tool you can achieve more than one goal has not been used other tools to achieve especially necessary adjustments both financial and structural including help to put the economy on track, the dosing sequence to modify the exchange rate administratively was in itself incompatible with economy as a whole, as a result of this situation that eventually become the national market value of the national currency is determined in response to market forces, which in turn reflect the economic and political situation in the country is desired.
It is normal in this case to become the nominal exchange rate of the local currency denominated higher than its market value any higher than the equilibrium value, which reflects the possibility of the dinar exchange rate in the market moved to a lower level than the level at which it settled by government intervention and the imposition of an administrative decision.
He concluded by saying that this economic vision strengthened through the big difference between the dollar sale scheduled rate at the central bank auction market and its price generated in the free market by supply and demand forces of reaction, since no longer the difference confined to the rank of decimal but exceeded for up to two places decimal places, and thus no longer Within economically at the international level and the local border or acceptable ranges.
The other thing is that the private demand for the national currency prevailing market price or the current is less than the total special offer, and that the central bank intervenes in the foreign exchange market to buy the difference in order to support the local currency internationally.
This shows clearly that the Iraqi Central Bank intervenes to artificially create intentional or on the request of the national currency against the Show more foreign currency, so that the quantity purchased from the local currency, which was higher than can be purchased in normal circumstances to sustain high and stable exchange rate.