What Are The Positives Of The Central Bank Reducing Interest Rates? Al-Sudani’s Advisor Explains, 4 NOV

 What Are The Positives Of The Central Bank Reducing Interest Rates? Al-Sudani’s Advisor Explains

Money and business   Economy News – Baghdad  The Prime Minister's Advisor for Economic Affairs, Mazhar Muhammad Salih, said that the Central Bank's decision to reduce interest rates to 5.5% encourages lending.

Saleh said, "The Central Bank's reduction of interest rates to 5.5% represents an expansionary policy, because it is assumed that when this rate is reduced, all banks will do the same, whether on lending or on deposits."

He pointed out that "in terms of deposits, this decision does not encourage people to put their money in the bank, but it encourages lending," noting that "banks have a lot of surpluses, and they are encouraged to grant more credit."

"Most banks have not reached 75% of credits"

Regarding cash credits, the Prime Minister's advisor for economic affairs explained that they "should represent 75% of deposits," adding that "most banks have not reached this percentage, especially private banks, so banks can reach this percentage through this process, where they lend and move their interest, and it is an attempt."

Regarding the extent to which the interest rate in Iraqi banks is equal to that of banks in the region, Saleh said, “Banks are not obligated to adhere to this rate, and it is a reference to monetary policy.”

It is noteworthy that the Central Bank of Iraq decided on Thursday (October 24, 2024) to reduce the annual interest rate between it and the banks registered with it from 7.5% to 5.5%, and to reactivate the work of securities (Islamic certificate of deposit and money transfers) between it and the banks operating in Iraq, with an annual return of 4% for a period of 14 days, and an annual return of 5.5% for a period of 182 days.

Financial Liberation

The Prime Minister's Advisor for Economic Affairs noted that "banks have the right to lend and borrow at the interest rate they deem appropriate, in accordance with the decisions of their boards of directors. This is called financial liberalization, which has been adopted since 2004."

The Central Bank of Iraq had set the maximum investment ceiling not to exceed 50% of the total private sector deposits at the bank, and that the bank’s investment ceiling in a single auction should not exceed (500) billion Iraqi dinars.   https://economy-news.net/content.php?id=49383