The economic adviser to Prime Minister Mahar Mohammed Saleh, on Saturday, explained accurate details about the importance and reasons for the Central Bank of Iraq’s decision to reduce the interest rate.
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Saleh told {Al-Furat News} that he said: “It is clear that the monetary policy of the Central Bank of Iraq has been to meet the requirements of growth in real economic activity by activating its operational objectives aimed at reducing the cost of credit and financing within the joints of the economic system in general and banking in particular.”'
He explained, “The Central Bank, through its decision issued under its October 24, began to reduce the interest rate of monetary policy (which is the price at which the Central Bank of Iraq deals with the banking system) by about 200 percentage points, by the interest under which the Central Bank deals with banks from 7.5% to 5.5%, which means that the Central Bank of Iraq follows an expansionary policy in targeting the money supply and in a manner commensurate with activating the real sector in the national economy and addressing unemployment indicators in the macroeconomics.”
According to the statement of the economic adviser to the Prime Minister, “Despite the above, the bank did not overlook in its new policy the importance of continuing to control the local liquidity levels and conducting high sterilization operations for it, by introducing debt instruments called Islamic depositary certificates and with a return that increases with the prolong the period of extinguish of those securities borted by the banking system, which are one of the sovereign debts that can be mortgaged or deducted in the secondary market, which is one of the preferred debts.”
He added, “The monetary policy of the central bank has given a reference to the financial and banking system that its easy or flexible policy adopted by the bank in moving the liquidity of the economy is under continuous control in order to play the role of the monetary authority in combating inflationary activities and imposing economic stability as its first central objective.”
Saleh concluded by saying, “Between expanding the movement of the liquidity of the economy as an expansionist policy and the imposition of control over liquidity sets by introducing debt instruments in return at the same time in parallel, we can call the current monetary policy of the Central Bank of Iraq as {a hybrid flexible monetary policy}.”
The bank decided to reduce the interest rate from 7.5% to 5.5%, as well as to reactivate the securities (Islamic certificate of deposit and cash transfers) according to an annual plan and two terms: with a return of 4% for 14 days and a return of 5.5% for 182 days.
Ragheed
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