Economy News – Baghdad
The Central Bank of Iraq reduced its dependence on the US dollar in commercial transactions, according to the Governor of the Central Bank of Iraq, Ali Mohsen Al-Alak, adding that the project to remove zeros in Iraq is under continuous review and study in the bank.
Countries delete zeros from the currency to re-evaluate the national currency and simplify financial transactions, and this occurs by removing a specific number of zeros from the nominal value of the currency, making it appear less inflationable and more stable.
Al-Alak stressed, in an extensive interview with Al-Jazeera Net, and seen by “Economy News”, that the Central Bank responded to global economic challenges such as high prices of energy and raw materials, by amending some monetary policies in line with the international situation and to strengthen confidence in the Iraqi dinar and prevent a sharp decline in its value.
He also stressed that the Iraqi Central Bank raised its holdings of foreign exchange and gold reserves to enhance the financial situation and financial stability of the country in order to enhance its ability to face potential economic crises, and these are the details of the dialogue:
What steps have you taken to address the crisis of the dollar’s rise against the Iraqi dinar and reduce the gap between the official price and the black market price?
The Central Bank of Iraq established new mechanisms to cover the accounts of local banks with their senders in other currencies (Chinese yuan, Indian rupee, euro and UAE dirham) in addition to the dollar, which reduced dependence on the US currency in the commercial transactions of customers of these banks, as the central bank sought to withdraw the excess liquidity in the economy that puts pressure on the exchange rate and maintain the export currency not growing unwanted.
What is the status of the country’s foreign reserves?
Foreign exchange reserves are the tool used by all central banks to maintain the stability of the local currency exchange rate against foreign currencies,as well as reducing exposure to external crises by maintaining foreign currency liquidity to absorb shocks in times of crisis.
The Central Bank of Iraq has a level of reserves that enable it to achieve this stability and provides it with sufficient flexibility to meet the demand for foreign currency to meet balance of payments requirements and other liabilities.
According to the latest data on the level of adequacy of foreign reserves, the foreign reserves of the Central Bank of Iraq cover 83.62% of the cash supply in its broad sense, covering the cost of import for 15 months, while the global standard rate is 20% covering 6 months of import.
However, the management of foreign reserves faces global and local challenges according to the economic nature of each country and the economic and geopolitical conditions it is going through.
What are the most prominent contributions of the Central Bank of Iraq to supporting the Iraqi economy?
The Central Bank responded to global economic challenges, such as the rise in energy and raw materials, by adjusting some monetary policies in line with the international situation and to strengthen confidence in the Iraqi dinar and prevent a sharp decline in its value, as the Central Bank raised interest rates to meet inflationary pressures resulting from changes in global prices and domestic demand, and issued new instructions to Iraqi banks to control cash liquidity.
The Central Bank of Iraq raised its holdings of foreign exchange and gold reserves to enhance the financial situation and financial stability of the country.
The Bank also launched programs and initiatives aimed at increasing financial inclusion, including promoting the spread of digital banks and online financial services, in addition to the contribution of the Central Bank of Iraq to sustainable development.
It also played an important role in financing economic and development projects through the provision of concessional loans and special financing programs aimed at supporting productive sectors while continuing to finance small and medium-sized enterprises.
Has the banking sector in Iraq been affected by the US sanctions imposed on some banks?
The sanctions imposed on banks are related to the decision to prevent dealing in dollars, as banks were not included in the list of sanctions issued by the Office of Foreign Assets Control, so the activities of banks continue, according to the applicable contexts and in all currencies except the dollar.
With regard to the situation of the Iraqi banking sector, it is in a state of stability. Government banks still hold approximately 79% of the assets of the total banking sector, compared to 21% for private banks.
Are there restrictions on the bank’s use of its balances in the United States?
There are no restrictions on our balances in the United States, taking into account the application of international standards to combat money laundering and the financing of terrorism in foreign transfers.
What are the reasons for the low use of bank cards in Iraq compared to neighboring countries? What are your steps to overcome this situation?
There are the main reasons behind the decline in the use of bank cards in Iraq, most notably the preference of many Iraqis for the use of cash in their daily transactions as a result of prevailing customs and traditions, as well as the limited spread of banking services, as a large percentage of the population, especially in rural areas, remains unconnected to banks.
Finally, the lack of financial awareness plays a big role in the hesitation towards the use of bank cards.
To meet these challenges, we are working to improve and expand the digital infrastructure. In this context, the Central Bank of Iraq has embarked on the establishment of a national electronic payment company to stimulate the banking and non-banking sectors and public institutions to develop this structure.
The Central Bank is working in cooperation with public and private institutions to organize awareness campaigns aimed at increasing public knowledge of the benefits of using bank cards and electronic payment methods to enhance confidence in the banking system.
Both the number of bank cards for 2023 increased to 19.75 million cards and the number of bank accounts to 13.3 million accounts.
The Bank focuses on improving security and increasing transparency, and has also established a platform to manage public complaints related to the financial sector, which helps develop strategies to address any problems facing financial institutions.
It is working to encourage financial innovation by supporting the development of services such as electronic wallets, banking applications and the opening of digital banks. He is also currently working to launch the national financial inclusion strategy, which includes solutions to most of these challenges, in addition to financial awareness programs targeting various segments of Iraqi society.
All this led to a rise in both the number of bank cards for 2023 to 19.75 million cards and the number of bank accounts to 13.3 million accounts.
Where is the digital banking project?
The Central Bank of Iraq issued licensing controls for digital banks in Iraq during May of this year, and it is in the process of studying the applications submitted in light of the requirements of digital banks, taking into account the risks and determinants related to digital banks, especially with regard to cyber security risks.
The main objective of licensing digital banks is to keep pace with developments in the banking environment, as well as to provide diversity in the provision of banking services in light of technological advances that contribute to enhancing financial inclusion by facilitating customers’ access to banking services.
In light of the International Monetary Fund’s statement that internal imbalances in Iraq have been exacerbated by the significant financial expansion and the decline in oil. How do you view his demands to correct financial conditions?
It is natural that the country’s dependence on the rentier supplier will bear the costs of external shocks that are out of control, represented by negative oil price shocks, and because the country needs to spend more than any stable country as a result of the circumstances it has gone through during decades of wars and destruction, which requires increased spending on infrastructure, which is the main pillar of the transition towards economic diversification.
All this has led to pressure on the public finance potential, especially in the aspect of revenues and thus resorting to borrowing, so we agree with the International Monetary Fund with regard to reforming public finances, and this positive effects support the independence of monetary policy in terms of achieving its main goal, which is to stabilize the general level of prices by controlling liquidity levels.
We agree with the International Monetary Fund on the reform of public finances, and the positive effects of this support the independence of monetary policy
Does the deletion of the dinar’s zeros destake the financial situation in Iraq?
The process of removing zeros from the currency means replacing a new currency with the old currency in order to simplify the calculation process among consumers, and it is often resorted to by countries that suffer from large inflation and have become unable to deal with paper currencies with a very low value.
Many believe that the process of deleting zeros is a process of economic and monetary reform and is resorted to in cases of high inflation and currency collapse, which alleviates the feeling of economic collapse (a process of monetary illusion). However, if this process is not supported by real economic factors and accompanied by radical reforms, it becomes a negative impact.
The project to remove zeros in Iraq is undergoing continuous review and study at the Central Bank of Iraq, taking into account the existence of the volume of an exported currency that exceeded 100 trillion dinars after it was 6 trillion in 2004, which followed the year that witnessed the exchange of currency, which was unwanted and poor in terms of quality.
In addition to the offer of wide cash approaching 179 trillion dinars, which requires specialized cadres, especially in the book accounts process, which government banks continue to suffer from due to the circumstances that the country has experienced.
How will Iraq’s payment of all its debts to the International Monetary Fund reflect on the economic situation of the country as a whole?
Iraq’s payment of all of its debts accumulated to the IMF over the years as a result of the Fund’s loan programs to address the economic challenges faced by Iraq in previous years, can have a positive long-term impact by strengthening credit and improving financial sustainability, as well as its repercussions on the country’s economic situation through:
Improving Iraq’s economic confidence and credit rating and obtaining better financing on future terms.
Enhancing the confidence of foreign and local investors in the ability of the Iraqi government to meet its financial obligations.
Achieving greater independence of Iraqi economic sovereignty, which makes the country less vulnerable to external pressures and interference in its economic policies.
Easing financial pressures and reducing financial burdens, which relieve pressure on the public budget.
Directing financial resources towards infrastructure and economic development projects and improving the ability to finance development projects.
Easing pressure on foreign reserves, which positively affects the stability of the currency and the country’s ability to cover its imports and maintain financial and economic stability.
Where are the procedures of the Central Bank of Iraq to localize the salaries of employees of the Kurdistan Region of Iraq?
We would like to indicate that this bank has taken the necessary measures to complete the process of localizing the salaries of the employees of the Kurdistan Region of Iraq in terms of providing the Federal Court with the list of banks licensed by this bank operating in the region, and providing the infrastructure and electronic payment systems that support the localization of salaries in the region, which clarifies the controls for opening a bank account and approving the electronic signature for the same purpose.
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Added 2024/09/21 – 6:34 PM
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