Saturday, September 21, 2024
DINAR REVALUATION REPORT : Iraq's Exchange Rate Defense amid Oil Price Decline: Central Bank's Role in 2024, 21 SEPT
Iraq's Exchange Rate Defense amid Oil Price Decline: Central Bank's Role in 2024
Iraq's central bank has been actively defending the exchange rate against the backdrop of a decline in oil prices, demonstrating the critical role central banks play in maintaining currency stability. . Despite the drop in oil prices, Iraq's ability to safeguard its currency is attributed to its substantial foreign currency reserves, which have enabled it to withstand the economic pressures. . This defense strategy is crucial for a country like Iraq, where oil constitutes a significant portion of its revenue and economic activity. ,. .
Iraq's Oil-Dependent Economy and Challenges
Iraq remains heavily reliant on oil, with oil revenues accounting for over 99% of exports, 85% of the government's budget, and 42% of its GDP. . This overdependence exposes the country to macroeconomic volatility and restricts fiscal space for countercyclical policy. . The decline in oil prices, therefore, poses significant challenges to the Iraqi economy, affecting government revenues, budgetary allocations, and economic stability.
Exchange Rate Stability and Central Bank's Role
In response to these challenges, the Central Bank of Iraq (CBI) has played a pivotal role in maintaining exchange rate stability. . Amidst the oil price decline, the CBI has utilized its foreign currency reserves to intervene in the foreign exchange market, ensuring that the dinar's value does not depreciate excessively. . This intervention is essential for preserving investor confidence and preventing capital flight. .
Impact of Oil Price Decline on CBI's Strategies
The decline in oil prices has necessitated adjustments in the CBI's foreign exchange policies. To manage the reduced oil income, the CBI has implemented measures aimed at creating domestic demand for the Iraqi Dinar (IQD) and accelerating the adoption of banking in the economy. . These measures are crucial for de-dollarizing the economy and reducing the dependency on cash transactions, which have contributed to the volatility of the currency. .
Long-Term Economic Reforms
Recognizing the limitations of short-term interventions, the Iraqi government and the CBI have embarked on a series of long-term economic reforms to address structural imbalances. . These reforms include labor market reforms, modernization of the financial sector, restructuring of state-owned banks, and reforms in the pension and electricity sectors. . The goal is to enable private sector development, boost non-oil exports, and broaden the tax base, thereby reducing the economy's vulnerability to oil price fluctuations. .
Visualization: Iraq's Oil Production and Exchange Rate Trend
To understand the interplay between oil prices and the exchange rate, a timeline chart illustrating Iraq's oil production and the dinar's exchange rate over the past few years would be insightful. This visualization helps in identifying patterns and the impact of oil price changes on the dinar's value.
Timeline Chart: Iraq's Oil Production and Exchange Rate Trend
31/12/2021
Oil Price Decline
28/2/2022
CBI Defends Exchange Rate
31/5/2023
Introduction of Economic Reforms
31/8/2023
Stabilization of Exchange Rate
31/12/2023
Continued Oil Price Decline
31/5/2024
Further Economic Reforms
31/8/2024
Exchange Rate Remains Stable
Conclusion
Iraq's central bank has been instrumental in safeguarding the exchange rate amidst a decline in oil prices, leveraging its foreign currency reserves. However, long-term economic reforms are essential to reduce the economy's vulnerability to oil price fluctuations and ensure sustainable growth. The ongoing efforts by the CBI and the Iraqi government to diversify the economy and modernize key sectors are critical steps in this direction.
"THEY DEFEND THE EXCHANGE RATE" BY MILITIAMAN, 21 SEPT
Militia Man
Article Quote: "Alaq...points out the decline in the price of oil has nothing to do with the rise in the exchange rate because Iraq has reserves for foreign currencies which enables it to defend the exchange rate."
That's what central banks do my friends. They defend the exchange rate. That does not matter whether it's at 1310, which they've done, or if it's going to be at whatever the Real Effective Exchange Rate is going to be in the future. They've worked this out.
This isn't something brand new. They know what they're doing. The drop the 3-zeros project is still...going to be applied.
"LOL!!!... GIVE IT UP ALREADY... ALAQ IS NOT GOING ANYWHERE." BY FRANK26, 21 SEPT
KTFA
FRANK26: "LOL!!!... GIVE IT UP ALREADY... ALAQ IS NOT GOING ANYWHERE.".........F26
The judiciary and the State Council confirm that the Governor of the Central Bank of Iraq is subject to the legal retirement age (documents)
9/18/2024
The State Council and the Supreme Judiciary settled the controversy over the continuation of the Governor of the Central Bank of Iraq, Ali Al-Alaq, in his position after reaching the legal retirement age.
The two councils confirmed in documents reviewed by Shafak News Agency that the legal age for retirement is 60 years, and upon reaching it, the duties of the official assigned to it end.
According to the documents, the House of Representatives clarified the legal position of Al-Alaq continuing in his position by addressing the State Council, which confirmed that Al-Alaq is included in the State Employees Law, noting that it had previously had an opinion on this matter on August 26, 2019.
In turn, the Supreme Judicial Council confirmed what was approved by the State Council regarding the inclusion of heads of independent bodies in the State Employees Law.
STATUS OF THE RV BY MNT GOAT, 21 SEPT
As you might remember each month, I started compiling a list of the newest events we have witnessed during a period of time. I wanted to continue this effort also for the month of September, but I am not.
Instead, I have to say it is all just about implementing the Electronic Payment and Inclusion of the banks into this new process.
I decided to save time not to list out all the articles this month. You know what they are and you read my commentaries throughout the month. But this does not downplay this effort by the CBI and the Finance Committee. They are committed now to complete this effort, and I believe they are way beyond our expectations of just where they currently stand in this effort.
Ali Al-Alaq is still the acting Director of the CBI just as we were told by my CBI contact the GOI never did accept his resignation.
The goals are still the same as they want to eliminate this Black Market corruption with the dollar and set the rate first at par with the official CBI rate. Then once this is in control, they intend to change the official rate and the rest is history as the saga of the currency swap out can then occur.
Again, in the articles today they talk about the stashes of currency outside the banking system and tell us there is that there are about 70 trillion dinars (about 50-60 billion US dollars) of free money supply, pointing out the possibility of investing it through the transition to the electronic system in financial transactions. But how will they do this? How can they get the citizens to turn over this money to the banks to get it digitized ?
Economist Qusay told Al-Maalouma told us that by focusing on investing in financial inclusion is accompanied by many benefits, the most prominent of which is withdrawing the free cash flow outside the banking system into the banking system. This is estimated at about 70 trillion dinars, or an average of 2 million dinars for every Iraqi citizen.”
We have read in the past that this effort to get this amount to the banks, could lead to an increase in liquidity in banks and increase their ability to grant through small and medium income-generating projects or by increasing the capacity for long-term strategic investment financing. So do you see the strategy yet of what Iraq is doing? In articles today they point out that and I quote – “Iraqi banks have the qualifications to switch to the electronic system, noting that “the transformation of the financial sector to the electronic system with credit cards will pave the way for attracting international investments and increasing confidence in the Iraqi economy.”
In short summary, is this not what we all want to happen so they can pull the trigger on this revaluation and reinstatement. Just asking 😊 😊 😊.
If you want to take a look at the previous list of events for previous months, we have never seen such progress since late 2022, please click on the LINK HERE to get to this blog page to read all the other events.
https://mntgoatnewsusa.com/latest-mnt-goat-newsletter/