Financial braking


Mustafa Mohammed Ibrahim
Within the latest trends of the International Monetary Fund on the economic reform in Iraq, especially after their recent meetings of the Standby Arrangement (SBA) Stand By Arrangement, the IMF has called for a policy of financial restraint.
Financial restraint is a set of restrictions placed by the monetary authorities on the financial and banking system, which is mainly aimed at satisfying the financial needs of the government by imposing a low or no interest rate and forcing banks to purchase government treasury bonds with a low yield as well as restrictions Strict on the movement of capital.

Among the manifestations of the policy of financial restraint is the administrative determination of the interest rate on loans and deposits as well as the allocation of credit and the imposition of a high implicit tax on the banking sector, as most countries of the world practiced a policy of financial restraint or financial liberalization through the imposition of a set of laws and controls and quantitative and qualitative restrictions imposed by the government which does not allow for financial intermediation employ capabilities available from this side, and another side prevail fiscal restraint policy or financial liberalization for many systems rate of exchange the most important of the fixed exchange rate regime, as the central bank to determine the value of the currency is fixed by money the Of gold and the proposal was designed foreign assets, so the need to provide legal and technological reforms in government banks to take their role in providing banking services to all sectors.

At the same time focus on the policy of financial liberalization as an international and domestic option that helps to achieve economic development and create a sound banking system.
Therefore, monetary policy should continue to achieve its objective of building a sound banking system capable of achieving all the challenges facing banking by building an efficient and effective system to cope with all macro-economic variables. Supervision and follow-up of the International Auditing Company and on this basis shows the mutual impact of fiscal policy in the preparation of the financial budget, but the important question remains how long will continue to borrow external.

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