Friday, May 17, 2024

Floating the Iraqi dinar. A solution to fill a ‘gap’ whose volatile price against the dollar, 17 MAY

Floating the Iraqi dinar. A solution to fill a ‘gap’ whose volatile price against the dollar

Shafaq News / The stability of the Iraqi dinar has been facing great challenges for years, as it is witnessing price fluctuations that have not stabilized, especially with the rapid rise of the dollar price and its very slow decline, as well as a gap between what the Central Bank of Iraq determines with what is sold in the parallel market, especially in banking shops that do not adhere to the instructions of the Central Bank.

To avoid the syndrome of “volatility” and “gap” in the price of the Iraqi dinar against foreign currencies, some experts believe that the solution lies in a kind of “surgical” operations of the country’s monetary system that may be painful, but achieve long-term monetary stability for the national currency through “float.”

The cash sale price according to the Central Bank is 1305 dinars per dollar, while the price for remittances abroad is 1310 dinars against the dollar, and the price in the parallel market is about 1450 dinars against the dollar in mid-May, according to local media, while it reached levels of 1600 dinars against the dollar in previous periods.

For months, the Iraqi authorities have imposed restrictions in their effort to control exchange rates, limit all commercial transactions within the country to the Iraqi dinars, and put in place a new mechanism that subject to external remittances for further scrutiny.

Iraqi economic analysts who spoke to Al-Hurra website warned some of them against making a decision that leads to the float of the dinar, while some believe that a mediate policy can be taken that suits the Iraqi economy based on “float” and “stabilization” at the same time.

Does the flotation policy fit the Iraqi economy?

The Prime Minister’s adviser on finance, Mazhar Saleh, believes that the flotation of the currency price does not suit the Iraqi economy, especially as it is “a rential economy, dominated by reserves in foreign currency.”

He explains in statements to the “Al-Hurra” website that “the economic vision that wants to float the Iraqi dinar to end the gap between the official price and the parallel price may be possible in an economy where the free market alone is affected in the movement of the balance of payments, and not in an economy in which the government sector is the dominant rent, and the generator of foreign currency reserves.”

“The monetary authority in Iraq alone is the main source of foreign currency supply and the meeting of the desired demand for foreign exchange in the domestic market,” he added.

Saleh believes that the claims for flotation means a provision “the adoption of 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 of exchange reached by the market at the end of the assumed flotation policy and return to stability again.”

The flotation scenario also means “the withdrawal of monetary power as the main central exhibitor of the foreign currency, and is replaced by new forces of free market makers, which certainly have only a limited offer of foreign exchange,” according to Saleh.

He points out that these forces carry an “uncontrolled package of inflationary expectations, called in the economic literature (the forces generating inflationary expectations), which will give the dominance of supply forces from speculators” who possess limited amounts of foreign exchange, offset by “open demand for foreign currency by the market,” exceeding “more than ten times in our estimate.”

Counselor Saleh described this policy as “blitted,” as long as “the central government supply of foreign currency will be absent from the market, we will not get any equilibrium point in an exchange rate that the flot is looking for except with a wide deterioration of the exchange as long as it is taking over by forces generating inflationary expectations in a very monortial economy.”

He warns that the exchange rate move in an “incomplete market, in terms of productivity in its compensation for the required commodity and service supply,” no one “will know how much the new exchange rate caused by the flotation” will be, which will be accompanied by “a wave of inflationary expectations,” which is difficult to control its trends, which may prompt monetary policy makers to “intervene with superior foreign reserves and unjustified waste in foreign exchange to impose stability.”

According to the World Bank, Iraq has 145 billion barrels of proven oil reserves, and is among the largest crude oil reserves in the world.

But Iraq hopes the country’s oil reserves will exceed 160 billion barrels, Oil Minister Hayyan Abdul Ghani recently announced.

What if the Iraqi dinar is floated?

The claims that appear every period for years and call for the float of the Iraqi dinar exchange rate are “strange” and most of them are released from people “not specialized in economics or monetary policy,” according to the professor of international economic relations, Abdul Rahman Al-Mashhadani, for Al-Hurra.

“Iraq cannot continue to float the dinar exchange rate, as evidenced by all agreements concluded with the International Monetary Fund since 2004, and the reviews were commending the fixation of the exchange rate by the Central Bank of Iraq,” he asserts in a decisive tone.

Al-Mashhani added that there has been a study from experts at the World Bank over the past years that has recommended “an exchange rate hike,” noting that even so, “these recommendations cannot be taken because the World Bank is concerned with regard to economic development, but following up on the recommendations for monetary policies is taken if they are from the International Monetary Fund.”

In its recent review Thursday, the International Monetary Fund praised the efforts of the Central Bank of Iraq in tightening monetary policy and strengthening its liquidity management framework.

He explains that “the real gap in the production wheel in the Iraqi economy, the majority of goods are imported from abroad, which means that the flotation will cause a spiral in price rates to become significantly high and affect marginalized classes,” noting that such a decision cannot be taken from the “monetary policy section” only, as the burdens it will impose on citizens must be considered.”

Al-Mashadani stresses that what has been applied in other Arab countries does not “mean that it can be applied to the Iraqi economy,” as the exchange rate is likely to become “at levels of 5000 dinars against the dollar,” as “the central bank has lost control of exchange rates, leaving them to float.”

He feared that the “float” would reflect on “social” problems as “salaries would be significantly eroded,” which could threaten to “slide new layers into poverty,” while “a class of traders, politicians and businessmen, who would benefit from the instability that would result from this would benefit.”

Al-Mashhadani agrees that the final flotation means “that the parallel market controls exchange rates,” but it will not achieve “the desired monetary stability,” as the central bank will then need to “print more local currency to keep up with market demand,” and the government will need to increase salaries and allocations for social assistance packages.

The Iraqi government’s adviser, Saleh, attributes the cause and quality of the “gap” in the exchange rates of the dinar against the dollar between the official market and the parallel to “external factors imposed by the compliance platform and administrative auditing restrictions on external transfer movements, which is not related to the deficit of the Monetary Authority’s reserves,” noting that Iraq’s foreign currency reserves are the highest in the country’s history, as it touches the levels of imports coverage for 16 months, compared to the global scale, which does not exceed the coverage of imports three months.

Dollar remittances through official channels have increased significantly in Iraq, as Iraq continues its reforms to the financial sector in line with international standards, according to a previous AFP report.

In late 2022, the Iraqi banking sector adopted the SWIFT electronic transfer system with the aim of providing better control over the use of the dollar, ensuring compliance with US sanctions on Tehran, as well as in order to limit the prosperity of the informal economy.

The financial standards adopted encouraged the emergence of a parallel currency market to attract those looking to obtain the dollar out of official channels.

Saleh pointed to the distortion in the price support of some commodities “from the side of fiscal policy, a support in which the rich and the poor are often both indiscriminate, and represents a real added intaly imperceptible income, which is the product of a financial policy inherited from the consumer welfare state of the rentier supplier.”

He added that “it is not yet possible that 90 percent of Iraq’s population is receiving support for the foodstuffs provided by the state as an extension of the 90th economic blockade in light of the changing living standards and lifestyle, the high numbers of the mysort and the growing middle class.”

https://www.shafaq.com/ar/اقتصـاد/تعويم-دينار-العراق-حل-لسد-فجوة-سعره-المضطرب-مام-الدولار

"CONTRACTOR HAVE BEEN PAID" BY JENTEL VIA RV HIGHLIGHTS TELEGRAM ROOM, 17 MAY

 Jentel Short:

5/16/24

By Jennifer Fallaw-Doering

@Fallawsophy


Expect notification early this next week.

This weekend redemption/ exchange centers are doing last minute training and assembling of teams.

They expect a rate Monday. If and when that goes out, they will release info to book an appointment.

For an explanation of this Jentel, watch Jennifer Fallaw-Doering on YouTube 5/16/24.


🇮🇶Iraq-What a Coincidenc...

---

Rv:


Contractors have been paid.

The exchange process can be begin.

Jennifer Fallaw-Doering

----

Jentel short: 4/4/24


From Michael.


They are rounding up remaining ring masters ( lower Cabal Management)

who have the authority and funds to call in minions who would create terrorist activities to stop the public from attending an appointment for exchange or redemption.


They must do as much as possible to ensure a smooth and safe opportunity to exchange.


Once it’s started it can’t be restarted. 

They want to eliminate as much threat as possible to ensure the public can make it to appointments without reason for government officials to lock people down. 

Current situation.


Also, Both plain clothes security and other uniformed security at redemption appointments. 


Have a great weekend,

Jen

@JenniferFallawDoering

@Fallawsophy

URGENT NEWS: Emergency Meeting on Iraq 2024 Budget #iqd Rate in Budget BY SANDY INGRAM

Among them are Russia and China... Members of the Security Council support ending the mission of the UNAMI mission in Iraq, 17 MAY

Among them are Russia and China... Members of the Security Council support ending the mission of the UNAMI mission in Iraq

 Yesterday, Thursday, a number of members of the UN Security Council, including Russia and China, supported Baghdad’s request to end the mission of the United Nations mission in Iraq by next year, but Washington did not immediately provide its support for this step.

Last week, the Iraqi government asked the United Nations to end, by the end of 2025, its political mission that it has been performing in the country for more than 20 years, considering that it is no longer necessary.

Iraq's Deputy Representative to the United Nations, Abbas Kadhim Obaid Al-Fatlawi, repeated the request before the Council, yesterday, Thursday, saying, "The mission achieved its goals."

Russian envoy Vasily Nebenzia supported this view, saying: “Iraqis are ready to take responsibility for the political future of their country.”

He added: "The remaining problems must not become an excuse for the United Nations mission to remain in the country indefinitely."

China's Deputy Representative to the United Nations, Geng Shuang, noted that within the framework of the annual renewal of the mission, whose mandate expires at the end of May, the Council must "propose a plan in order to ensure gradual withdrawal and a smooth transition towards final withdrawal."

Given that UN missions can only operate with the consent of the host country, Britain and France have also expressed their support for the shift in the partnership between Iraq and the UN.

The position of the United States was more ambiguous, as Ambassador Linda Thomas-Greenfield said that the United Nations Mission (UNAMI) still had “important work to perform,” and did not address Baghdad’s request.

She emphasized the mission's key role in many important political issues, such as supporting the organization of elections and promoting human rights, although Iraq clearly requested that the mission focus more directly on economic issues.

In an assessment requested by the council, German diplomat Volker Perthes said in March that UNAMI, which had more than 700 staff as of late 2023, “appears in its current form to be too large.”

Perthes called on the mission to "begin transferring its tasks to the national institutions and the United Nations team in the country in a responsible, organized and gradual manner within an agreed upon time frame."  link



ABOUT VIETNAM 'S ABILITY TO MOVE INTO A MARKET ECONOMY" BY GOLDILOCKS, 17 MAY

 GOLDILOCKS

Goldilocks' Comments and Global Economic News Monday AM 5-13-24


The link below provides information on Vietnam's review by the US Department of Commerce regarding Vietnam's ability to move into a Market Economy.

 

 My understanding from the previous article on Vietnam reviewed is that this is not a graded review. It is simply a valuation of the types of goods and services they can provide comprehensively.

 

 Vietnam is showing steady growth in several areas of their Market. Their potential to increase National Capital Investment opportunities on a Global scale is evident.

 

 Clearly, hurdles are being cleared for Vietnam to move into a Market Economy. A Market Economy will allow them to freely move their money  through supply and demand.


******************************

 

 Credit Valuation Adjustments on their currency will be determined by Vietnam's ability to move their goods and services near and far at competitive rates.

 

 © Goldilocks

Coffee with MarkZ and Mr. Cottrell. 05/17/2024

The Monetary Fund: “Internal Stability Has Improved Since The New Government Took Office In October 2022.”, 17 MAY

 The Monetary Fund: “Internal Stability Has Improved Since The New Government Took Office In October 2022.”

Reports   Washington, DC - On May 13, 2024, the Executive Board of the International Monetary Fund (IMF) concluded Article IV consultations with Iraq and considered and approved the staff assessment.

Internal stability has improved since the new government took office in October 2022, facilitating the passage of Iraq's first three-year budget, which entailed a major fiscal expansion starting in 2023, supporting a strong recovery in Iraq's non-oil economy after a contraction in 2023. 2022.

Iraq has been largely unaffected by the conflict in the region, and domestic inflation fell to 4% by the end of 2023, reflecting lower international food prices, a revaluation of the currency from February 2023, and a return to normalization of trade finance.

Continued fiscal expansion is expected to boost growth in 2024.

*Executive Council evaluation*:  Executive Directors agreed with the thrust of the staff assessment, and welcomed the strong economic recovery, low inflation, and improving domestic conditions that led to the implementation of the first-ever three-year budget.

Directors agreed that the immediate implementation of Customs and Revenue Administration reforms, full implementation of the Single Treasury Account, and strict oversight and limitation of the use of extra-budgetary funds and government guarantees are essential to support fiscal consolidation.

Directors praised the central bank's efforts to tighten monetary policy and strengthen the liquidity management framework.

Improving coordination between fiscal and monetary operations would help absorb excess liquidity and enhance monetary policy transmission.

The directors agreed that accelerating the restructuring process of large state-owned banks was essential. They support the modernization of the private banking sector, by facilitating the establishment of correspondent banking relationships, reducing regulatory uncertainties, and enhancing the efficiency and competitiveness of private banks.

Directors agreed that improving governance and combating corruption were also key, and encouraged further strengthening of the AML/CFT framework, strengthening public procurement and business systems, and addressing deficiencies in the electricity sector.

Directors welcomed renewed efforts towards accession to the World Trade Organization and encouraged the authorities to improve the coverage and timeliness of statistics.

Directors welcomed the authorities' request to establish a policy coordination instrument.

The next Article IV consultations with Iraq are expected to be held in the standard 12-month cycle.

322 views   05/16/2024 - https://economy-news.net/content.php?id=43490

TIDBIT FROM FRANK26, 13 NOV

  Frank26  The monetary reform policy is being introduced to you Iraqi citizens on a daily basis isn't it.     It's is my hope.  It ...