FIREFLY: International Development Bank opens in Erbil.
FRANK: Notice how they are preparing your banks in many ways to receive the new exchange rate when Sudani releases it. They talked to you about the float...the basket... the lower notes...the old lower notes, your history...Now they're going to tell you Iraqi citizens about your banks...they are educating you on the many services that your banks will be offering you once this exchange rate is released.
FIREFLY: Television says Iraq is now producing 1 million liters of gasoline on a daily basis with the new refineries...They are saying we will have enough gasoline for our self sufficiency of our county and also for global trading on the market..
FIREFLY: They said our success is from the visit to the United States of America because it lifted almost all sanctions on our banks and others are close to being lifted too.
"Based on the decision of the Board of Directors of this bank No. (191) of 2023, it was decided to give the mediation companies that buy and sell foreign currencies under category (C) to merge to be classified as (A) or (B) until 3/31/2024."
Do you remember this article from the CBI?
I remember talking with you about this particular article and how it was a reclassification of the Iraqi dinar. There is more information that is important for us to know at this time, so I have saved it to share with you now.
Moving to an A/B from a C classification essentially means that holders of the Iraqi Dinar is now a registered security. Registered Securities are freely tradable, and they can be sold to public investors on a much more broader scale.
Banks are generally owned by stockholders. This is what forms most of the Equity Capital that comes into a bank. Our foreign currency exchange with banks helps to build liquidity for them and the markets.
Since banks are privately owned for profit institutions, this makes our foreign currency exchange with them a private exchange.
Jester and Freedom Fighter do a "Saturday Night Live" call each week to explain the importance of getting to know your "Relationship Managers" whom will participate in your exchange at some level, and they will continue to participate in your banking success through periodic reviews of your account.
Each week, Freedom Fighter and Jester have live conversations with people who are going out to establish banking relationships that will guide them in the exchange process, and they come back to tell people what they found.
FRANK26: "THIS IS IT!!!... READ 'EM AND STOP WEEPING".......F26
Floating the dinar" returns to the forefront.. Will the Central Bank of Iraq resort to it and what are its risks?
5/9/2024
From time to time, calls for floating the Iraqi dinar float on the surface of the Iraqi financial market, in order to bridge the gap between the prices of the dinar and the dollar, and these calls meet every time they return to the forefront, with supporters who see it as saving the Iraqi economy, and opponents who see it as the most dangerous stage that Iraq will pass through because of its Of risks to his economy.
Floating currencies is known as liberating the exchange rate of the currency, so that it becomes completely liberated, so the government or central banks do not interfere in determining its value directly, but rather it is automatically sorted into the currency market through the supply and demand mechanism that allows determining the exchange rate of the national currency against foreign currencies.
Critical vision
Financial expert Safwan Qusay said in an interview with Al-Ahed News, “The Central Bank of Iraq adopted a fixed price policy, that is, so that every dollar became equal to 1,320 dinars, and there are calls to release the price and not fix it at a specific rate. This means that demand and supply are what determine the exchange price.” ".
He added that "the measure, in light of the absence of economic diversification, will harm the Iraqi market and will reflect negatively on economic stability," noting the necessity of "diversifying the economy first and then liberalizing the fixed price later and providing a basket of different currencies for the exports of different countries."
Qusay stated, “We can have a price that is proportional to export, supply, demand, need, processing, and consumption, as such measures are far from the Iraqi economy,” considering that “activating flotation will create a market of speculation that cannot be controlled.”
In turn, financial expert Saif Al-Halafi saw the necessity of “supporting the Iraqi dinar instead of floating, but in a way closer to the language of floating.”
He explained in an interview with Al-Ahed News, “There is a possibility for the central bank to follow the same mechanisms as the American Federal Bank. Strengthening the dollar in the market is determined by the American Federal Reserve, and it depends on the market mechanisms of supply and demand. Therefore, the Central Bank of Iraq and its law allow the strengthening of the dinar, because Monetary policy is under his authority and he is responsible for the value of the dinar against the dollar.”
Al-Halafi notes, “Raising the value of the dinar against the dollar will put the government before another test, which is raising the value of the dinar again to protect the citizen from rising prices,” adding, “This incident occurred when Iraq fixed the price of the dollar at 1,320 dinars, and it was compensated by the export of goods in a manner Huge waves from neighboring countries to Iraq, and the government and the central bank took responsibility for controlling the dollar.”
He points out the possibility that “there will be two exchange rates for the dollar against the dinar and it will change according to the actual need of the daily situation,” explaining that “the Iraqi market has two exchange rates, the first at the central bank, which is 1,320 dinars to the dollar, while the second price is the market price or the parallel price.”
He shows that “all attempts carried out by the Central Bank and the government to control and curb the parallel price have failed, and that this price emerged due to the geopolitical challenges surrounding Iraq, and the distancing of importing merchants from Iran, Syria, Russia, and other countries subject to sanctions from America, who cannot enter their goods through Transfers and credits.
Al-Halafi confirms that “raising the value of the dinar will have an advantage, as it will provide a large labor market in Iraq due to the price difference, so raising the value of the dinar’s price against the dollar, even if only slightly, will protect Iraqi workers,” pointing to “the possibility of the influx of large foreign workers due to the size of the projects.” in which the government will work.
Crazy risks
For his part, researcher in financial affairs, Nabil Al-Marsoumi, believes that “the decision to float the dinar has some economic positives, but the economy should not be taken in its abstract aspect, but rather insofar as it relates to people, especially the poor.”
The decree says in a Facebook post, “In light of Iraq’s lack of a national private sector that can contribute to increasing the supply of dollars in the market and because of the huge volume of imports, which reach 67 billion dollars annually, the only party that owns the dollar is the government.”
He adds: "If the government decides not to interfere in the exchange market, it is expected that the dinar will witness a violent collapse and rampant inflation that will cause prices to rise to insane levels that will cause severe damage to citizens' living standards. The poor will become more miserable and will later lead to social tensions and a major rift in the social peace."
Previous experiences
In this regard, financial expert Manar Al-Obaidi points out, “The experience of floating the currency was successful in one of the Arab countries and supported its economy positively.”
He added in an interview with Al-Ahed News, “In 2018, Morocco adopted a new monetary policy represented by what is known as the managed float policy. This policy is a combination between the fixed rate policy and the floating rate policy, through which central banks set minimum and upper limits for movement by determining the exchange rate against... currency or a group of foreign currencies, and one of these banks was the Central Bank of Morocco.”
Al-Obaidi explains, “The managed float policy aims to gradually liberalize the currency until complete liberalization of the exchange rate is achieved. Indeed, the Central Bank of Morocco has begun to set a fluctuation range, which is known as the margin of rise or fall in the exchange rate, which initially reached 0.3%, meaning that the Central Bank is allowed to rise above the specified exchange rate.” By 0.3% or decreasing according to supply and demand until it reached a fluctuation range of 5% in March 2020, and this policy was accompanied by a support policy represented in canceling customs tariffs on some basic materials such as food and supporting funds that support vulnerable classes.”
Al-Obaidi believes that “this policy may be a successful alternative in Iraq by following a managed float policythat controls the range of volatility and works to gradually increase it until the currency is completely liberalized,” noting that “there is no study linking inflation rates to the exchange rate.” In the parallel market, the best way to know the effect is through a deliberate experiment with a managed float of the exchange rate.”
Government advice
The Advisor to the Prime Minister for Financial Affairs, Mazhar Muhammad Saleh, had previously explained the danger of the exchange rate becoming unstable if the demands to float the dinar were achieved.
Saleh said in a statement followed by Al-Ahed News, “Calls for floating the dinar to end the gap between the official exchange rate and the parallel market may be possible in an economy in which the free market alone influences the movement of the balance of payments, and not in an economy in which the rentier government sector is dominant and generates currency reserves.” Foreign currency, as the monetary authority alone is the main source of supply of foreign currency that meets the desired demand for foreign exchange in the money market, to provide stability in this market and achieve a desired and homogeneous exchange rate through the interventionist role played by monetary policy.
He added, "Claims for flotation mean in all cases adopting the prevailing exchange rate in the parallel market to achieve the goal of stability and balance in the official exchange rate itself at a new point reached by the market at the end of the supposed flotation policy and returning to stability again. Also, the flotation scenario means in all cases the withdrawal of the authority." Cash from being an essential central supply of foreign currency, to be replaced by new forces supplying foreign currency from free market makers, which only have a weak, limited supply of foreign exchange, and at the same time they carry an uncontrolled package of inflationary expectations and are called in economic literature the forces generating expectations. Inflationary
He continued, "The hypothetical new supply forces for foreign exchange adopted by the exchange market in that scenario will mean the dominance of supply forces from speculators with very limited quantities of foreign exchange available for supply in the parallel market, matched by an open demand for foreign currency on the part of the market that undoubtedly exceeds that limited parallel supply."
of foreign exchange, perhaps by more than 10 times at least in our estimation, and such a policy of floating to achieve a homogeneous equilibrium exchange rate would be an open and perhaps unruly situation, as long as the central government supply of foreign currency would be absent from the market, and we would not then obtain any equilibrium point in the exchange rate. An exchange rate that is sought to float except with a widespread deterioration of the exchange rate as long as it is controlled by forces that generate inflationary expectations, as we noted in a highly unilateral rentier economy, and it is an exchange rate whose mechanisms will move in a market that is incomplete in terms of productivity in compensating it for the required supply of goods and services.
Saleh warned, “Then no one knows how much the new exchange
rate resulting from the flotation will be, which will
undoubtedly be accompanied by a prior wave of inflationary expectations, which is a dangerous wave whose directions are difficult to control, which may force monetary policy according to this floating scenario by intervening in foreign reserves.” It is an unjustified extravagance in foreign exchange to impose a state of stability in the general level of prices again just to adopt it when exchange rates reach low rates, and no one knows how much they will reach.”
AFTER WASHINGTON’S REASSURANCES, IRAQ IS CLOSE TO BYPASSING DOLLAR SANCTIONS
The official positions stated that it is close to overcoming the repercussions of the US sanctions on a number of banks, and Prime Minister Muhammad Shiaa Al-Sudani said that financial transactions in the US dollar are “moving in the right direction.”
Al-Sudani’s statements came about a week after his visit to Washington, which included meetings with officials in the US Treasury, which had previously punished Iraqi banks and caused an imbalance in the exchange rate against the local dinar.
Today, Tuesday, Al-Sudani received a delegation from the Union of Arab Banks in Baghdad, and said, “The financial and economic reform process adopted by the government cannot occur without a solid banking system that is in harmony with the world.”
The Prime Minister explained, according to a press statement, that Iraqi banks are on the right path in their transactions related to financial transfers, and that coordination of financial and monetary policy with the Central Bank continues, while maintaining the bank’s independence.
FINANCIAL REFORM Al-Sudani renewed his talk about “the measures taken by the government during the past period that helped identify the defects in the banking system and worked to fix them.”
(Please go see my blog sections on the “White Paper” and the “Pillars of Financial Reform”. These are the areas of concern that the US Treasury needs them to fix if they are to deal in dollars and other foreign transactions (meaning global transactions) in dealing with payments to and from Iraqi banks. In this article they are telling Iraq is NOT yet ready and there is still more work to do in financial reforms sector)
On the other hand, the delegation of the Union of Arab Banks praised “the government’s measures to reform the banking sector; These are clear measures aimed at strengthening and enhancing the work of this sector.”
The Arab delegation expressed its appreciation for the government’s steps in supporting the private sector and enhancing its role in sustainable development and international and regional partnerships.
Ali Tariq, Executive Director of the Iraqi Private Banks Association, who attended the meeting with the Prime Minister, told Asharq Al-Awsat that he “discussed the development of Iraqi Arab and foreign banking relations, which will reflect positively on local banking services.”
“Forced, not a choice.” For his part, the professor of finance at the College of Administration at Al-Mustansiriya University, Sadiq Al-Bahadli, said that Iraq is “forced and has no choice” regarding taking the correct procedure related to foreign financial transactions.
Al-Bahadli said, “The US Federal Bank controls almost all of Iraq’s funds derived from oil revenues, and they are sold in US dollars, and the Federal Reserve does not allow the dollar to go out to other countries without verifying the destinations to which these funds reach.”
Al-Bahadli believed that “ reforms in the field of foreign transfers must be accompanied by a solid banking system, and this has not happened so far, unfortunately.” He said: “Our banking system is still significantly backward, so the new foreign transfer system has had a negative impact on the work of most local merchants and importers.” ».
“The financial and banking issue is quite complex in Iraq,” said Al-Bahadli, who cited US President Joe Biden’s recent decision to continue implementing the decision to protect Iraq’s funds that was taken by former President George Bush 21 years ago.
Biden said, during his signing of the decree in which he extended the state of national emergency related to the situation in Iraq for another year: “There are still obstacles to the orderly reconstruction of Iraq, restoring and maintaining peace and security in the country, and developing political, administrative and economic institutions in Iraq.”
The US Treasury Department has previously placed several Iraqi banks on the blacklist and banned them from dealing in the US dollar under the pretext of those banks engaging in currency smuggling and money laundering operations.
Political Discussion
A political source linked to political discussions regarding US sanctions commented, “The political forces that have financial interests linked to banks have recently reached the conviction that they must adapt to the reality of Washington’s financial influence in Iraq, so they helped mitigate the effects of suspicious transactions, including money laundering and imports.” “The phantom.”
In contrast to the Prime Minister’s talk about Iraqi banks being on the right path with regard to remittances and financial transactions, the Services Committee in the Federal Parliament expressed its surprise at what it described as “duplication of decisions” issued by the Central Bank regarding the process of foreign transfers.
The committee said in a press statement, “This policy, in all its aspects, refers to wasting public money and creating glut for a small number of beneficiaries, which in general did not achieve anything for Iraq and its people, which made Iraq lose billions of dollars annually due to differences in transferring hard currency abroad, which provided a service on a plate.” Whoever goes to the corruption mafias without any benefit for the public interest.”
The committee stated that “one of the ridiculous and crying ironies,” as it described it, is “foreign banks achieving profits amounting to billions of dinars from hard currency transfers from Iraq abroad without providing any service or benefit for the public interest.”
"The U.S. is in a dilemma about whether to upgrade the non-market economy status of Vietnam to that of a market economy." The U.S. Department of Commerce has until late July to complete this review and decision. A market economy would bring with it significant trade relationship opportunities. Vietnam would become a country where supply and demand would determine prices on their goods and services. A shift in a monetary policy such as this would bring more power back to the people and less to the government.
It would move from government intervention powers for the stabilization of their currency to incentives toward supply and demand determined by the people and the industries they promote.