Tuesday, December 3, 2024
AL-ALAQ: WE ARE CONSTANTLY REVIEWING THE DELETION OF ZEROS FROM THE DINAR, AND THERE ARE NO RESTRICTIONS ON OUR BALANCES IN AMERICA, 4 DEC
AL-ALAQ: WE ARE CONSTANTLY REVIEWING THE DELETION OF ZEROS FROM THE DINAR, AND THERE ARE NO RESTRICTIONS ON OUR BALANCES IN AMERICA
Economics News
9/21/2024 Baghdad
The Central Bank of Iraq has reduced reliance on the US dollar in commercial transactions, according to the Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, adding that the project to remove zeros in Iraq is under continuous review and study at the bank.
Countries remove zeros from their currency to revalue their national currency and simplify financial transactions. This is done by removing a specific number of zeros from the nominal value of the currency, making it appear less inflationary and more stable.
Al-Alaq confirmed, in an extensive interview with Al Jazeera Net, which was reviewed by “Al-Eqtisad News”, that the Central Bank responded to global economic challenges, such as rising energy and raw material prices, by amending some monetary policies in line with the international situation and to enhance confidence in the Iraqi dinar and prevent a sharp decline in its value.
He also stressed that the Central Bank of Iraq increased its holdings of foreign exchange and gold reserves to strengthen the country’s financial position and financial stability in order to enhance its ability to confront potential economic crises. These are the details of the dialogue:
What steps have you taken to address the crisis of the dollar’s rise against the Iraqi dinar and reduce the gap between the official price and the black market price?
The Central Bank of Iraq has created new mechanisms to cover the accounts of local banks with their senders in other currencies (Chinese yuan, Indian rupee, euro and UAE dirham) in addition to the dollar, which has reduced reliance on the US currency in commercial transactions for the clients of these banks, as the Central Bank seeks to withdraw excess liquidity in the economy that puts pressure on the exchange rate and to prevent the exported currency from growing in an undesirable manner.< /span>
What is the status of the country’s foreign reserves?
Foreign exchange reserves are the tool used by all central banks to maintain the stability of the local currency exchange rate against foreign currencies, as well as to reduce exposure to external crises by maintaining liquidity in foreign currency to absorb shocks in times of crisis.
The Central Bank of Iraq has a level of reserves that enables it to achieve this stability and provides it with sufficient flexibility to meet the demand for foreign currencies to meet the requirements of the balance of payments and other obligations.
According to the latest data on the level of foreign reserves adequacy, the foreign reserves of the Central Bank of Iraq cover 83.62% of the broad money supply, i.e. covering the cost of importing 15 months, while the global standard rate is 20%, covering 6 months of importing.
However, foreign reserves management faces global and local challenges according to the economic nature of each country and the economic and geopolitical conditions it is going through.
What are the most prominent contributions of the Central Bank of Iraq in supporting the Iraqi economy?
The Central Bank responded to global economic challenges, such as rising energy and raw material prices, by adjusting some monetary policies in line with the international situation and to enhance confidence in the Iraqi dinar and prevent a sharp decline in its value. The Central Bank raised interest rates to counter inflationary pressures resulting from changes in global prices and domestic demand, and issued new instructions to Iraqi banks to control cash liquidity.
The Central Bank of Iraq has increased its holdings of foreign exchange reserves and gold to strengthen the country’s financial position and financial stability. The bank also launched programs and initiatives aimed at increasing financial inclusion, including enhancing the spread of digital banks and online financial services, in addition to the Central Bank of Iraq’s contribution to sustainable development.
It also played an important role in financing economic and development projects by providing soft loans and special financing programs aimed at supporting productive sectors while continuing to finance small and medium enterprises.
Has the banking sector in Iraq been affected by US sanctions imposed on some banks?
The sanctions imposed on banks are related to the decision to ban dealing in dollars, as the banks were not included in the sanctions list issued by the Office of Foreign Assets Control, and therefore the banks’ activities continue, according to the applicable procedures and in all currencies except the dollar.
As for the situation of the Iraqi banking sector, it is experiencing a state of stability, as government banks still control approximately 79% of the total assets of the banking sector, compared to 21% for private banks.
Are there any restrictions on the bank’s use of its funds in the United States?
There are no restrictions on our US accounts, taking into account the application of international standards to combat money laundering and terrorist financing in foreign transfers.
What are the reasons for the low rate of bank card usage in Iraq compared to neighboring countries? What are your steps to overcome this situation?
There are major reasons behind the low use of bank cards in Iraq, most notably the preference of many Iraqis to use cash in their daily transactions due to prevailing customs and traditions, in addition to the limited spread of banking services, as a large percentage of the population, especially in rural areas, remains unconnected to banks.
Finally, lack of financial awareness plays a major role in the reluctance to use bank cards.
To address these challenges, we are working to improve and expand our digital infrastructure. In this context, the Central Bank of Iraq has initiated the establishment of a national electronic payment company to encourage the banking and non-banking sectors and public institutions to develop this infrastructure.
The Central Bank, in cooperation with public and private institutions, is organizing awareness campaigns aimed at increasing public knowledge of the benefits of using bank cards and electronic payment methods to enhance confidence in the banking system.
The number of bank cards in 2023 will rise to 19.75 million cards and the number of bank accounts will rise to 13.3 million accounts.
The bank focuses on improving security and increasing transparency, and has created a platform to manage public complaints related to the financial sector, which helps in developing strategies to address any issues facing financial institutions.
It works to encourage financial innovation by supporting the development of services such as electronic wallets, banking applications, and opening digital banks. It is also currently working to launch a national financial inclusion strategy that includes solutions to most of these challenges, in addition to financial awareness programs targeting various segments of Iraqi society.
All of this resulted in both the number of bank cards in 2023 rising to 19.75 million cards and the number of bank accounts rising to 13.3 million accounts.
Where has the digital banking project come from?
The Central Bank of Iraq issued licensing controls for digital banks in Iraq during May of this year, and is in the process of studying the applications submitted in light of the requirements for digital banks, taking into account the risks and limitations related to digital banks, especially with regard to cybersecurity risks.
The main objective of licensing digital banks is to keep pace with developments in the banking environment, as well as to provide diversity in the provision of banking services in light of technological progress that contributes to enhancing financial inclusion by facilitating customers’ access to banking services.
In light of the International Monetary Fund’s statement that internal imbalances in Iraq have worsened due to the large financial expansion and the decline in oil…
How do you view its demands to correct the financial situation?
Naturally, the country’s dependence on rentier resources leads to bearing the costs of external shocks that are beyond its control, such as negative oil price shocks, and because the country needs more spending than any stable country due to the conditions it has gone through during decades of wars and destruction, which requires increasing spending on infrastructure, which is the basic pillar of the shift towards economic diversification.
All of this has led to pressure on the capabilities of public finance, especially the revenue side, and thus resorting to borrowing. Therefore, we agree with the International Monetary Fund regarding reforming the public finance situation, and the positive effects this has on supporting the independence of monetary policy in achieving its primary goal, which is the stability of the general price level through controlling liquidity levels.
We agree with the International Monetary Fund regarding the reform of public finances, and the positive effects this has on supporting the independence of monetary policy.
Will removing zeros from the dinar destabilize the financial situation in Iraq?
The process of removing zeros from a currency means replacing the old currency with a new one in order to simplify the accounting process between consumers. It is often resorted to by countries that suffer from high inflation and have become unable to deal with paper currencies of very low value.
Many believe that the process of deleting zeros is an economic and monetary reform process and is resorted to in cases of high inflation and currency collapse, which reduces the feeling of economic collapse (a monetary illusion process). However, if this process is not supported by real economic factors and accompanied by radical reforms, it becomes negative.
The project to remove zeros in Iraq is under continuous review and study at the Central Bank of Iraq, taking into consideration the existence of a volume of issued currency that exceeded 100 trillion dinars after it was 6 trillion in 2004, the year following the exchange of the currency that was undesirable and of poor quality.
In addition to a wide cash supply approaching 179 trillion dinars, which requires specialized cadres, especially in the bookkeeping process, which government banks are still suffering from due to the circumstances the country has gone through.
How will Iraq’s repayment of all its debts to the International Monetary Fund affect the country’s economic situation as a whole?
Iraq’s repayment of all its debts to the International Monetary Fund, accumulated over the years as a result of the Fund’s loan programs to address the economic challenges that Iraq faced in previous years, could have a positive impact in the long term by enhancing credit and improving financial sustainability, in addition to its repercussions on the country’s economic situation through:
1.Improve Iraq’s economic confidence and credit rating and obtain financing on better terms in the future.
2.Enhancing the confidence of foreign and local investors in the Iraqi government’s ability to meet its financial obligations.
3.Achieving greater independence for Iraqi economic sovereignty, making the country less vulnerable to external pressures and interference in its economic policies.
4.Alleviating financial pressures and reducing financial burdens, which reduces pressure on the general budget.
5.Directing financial resources towards infrastructure and economic development projects and improving the ability to finance development projects.
Reducing pressure on foreign reserves, which has a positive impact on the stability of the currency and the country’s ability to cover its imports and maintain financial and economic stability.
Where have the Central Bank of Iraq’s procedures for localizing salaries of employees in the Kurdistan Region of Iraq reached?
We would like to point out that this bank has taken the necessary measures to complete the process of localizing salaries of employees of the Kurdistan Region of Iraq in terms of providing the Federal Court with a list of banks licensed by this bank and operating in the region, and providing the infrastructure and electronic payment systems that support the processes of localizing salaries in the region, which clarifies the controls for opening a bank account and adopting an electronic signature for the same purpose.
EXCERPTS FROM MARKZ, 4 DEC
EXCERPTS FROM MARKZ
MZ: I have a number of confirmations with people on the ground in Iraq that they are seeing some lower denominations in Iraq. They are seeing $500’s and $250’s . they have suddenly released a large number of them into the market. They are functionally pretty useless right now.
MZ: With the current pricing right now of the dinar, the $250 dinar note is worth about .19 cents US. The $500 note is worth about .38 cents US. Why would they suddenly release into circulation so many of these bills? Why do you need a bunch of notes only worth .19 Cents? You don’t .
MZ: Doesn’t it make a great bridge … a functional currency when the rate changes? Suddenly it RVs and a $250 notes goes from .19 cents to (lets say ) $25.00? that is a massive change in value.
MZ: I have some pretty excited folks from Iraq who say “this is it” and now all they have to do is release the even smaller notes which they already have. This $250 note being released should have you all excited.
MemberL The 250 is a bridge for when it revalues…awesome news.
MZ: Yes its functional bridge for when they change the value.
Member: Project to delete the 3 zeros must be close with more 250 and 500 dinar notes being released.
MZ: Exactly. There is no reason to release those notes unless a revaluation was happening soon. And they expect it to be done on or before Victory Day .
Iraq suspends official work to celebrate Victory Day, 4 DEC
Iraq suspends official work to celebrate Victory Day
he Council of Ministers announced today, Tuesday, that official work will be suspended on December 10th in celebration of Victory Day.
He said in a statement,
"The Council of Ministers decides to suspend official work on Tuesday, December 10, 2024, in all ministries and government institutions, in celebration of Victory Day and the anniversary of the liberation of the land of Iraq from the terrorist ISIS gangs."
MILITIAMAN CC HIGHLIGHTS NOTES, 4 DEC
MILITIAMAN CC HIGHLIGHTS NOTES
Summary
Iraq’s Central Bank Governor asserts the country’s strong monetary position, emphasizing private sector growth and the cessation of government loans to boost economic stability.
Highlights
- 📈 Excellent Monetary Position: Central Bank Governor highlights Iraq’s strong financial standing despite regional tensions.
- 🏦 Launch of Riata Bank: New bank to support small enterprises, enhancing the economy.
- 🌱 Green Financing Initiative: Central Bank promotes renewable energy projects to combat climate change.
- 💳 Digital Transformation: Focus on electronic payments and digital banking systems for efficiency.
- 🚫 Stop on Government Loans: Early suspension of loans as fiscal year-end approaches to organize financial statistics.
- 🌍 International Trade Readiness: Development of insurance services for shipping to facilitate international commerce.
- 🛡️ Anti-Corruption Measures: Federal Integrity Commission working on new strategies to combat corruption and enhance investor confidence.
Key Insights
- 🌟 Strong Monetary Stability: Iraq’s low inflation and high foreign reserves position it favorably compared to other regional banks, fostering investor trust.
- 🔄 Transition to Private Sector: Emphasis on diversifying the economy away from oil reliance, signaling a commitment to sustainable growth.
- 🌍 Global Integration: The Central Bank’s international practices indicate readiness for increased foreign investments and trade relations.
- 🔍 Focus on Infrastructure: Significant investments in education and infrastructure through the private sector aim to boost local production and employment.
- 📊 Innovative Financial Solutions: The introduction of electronic platforms for insurance and banking services enhances operational efficiency and security.
- 👥 Community Involvement: The government’s collaboration with various sectors to address corruption enhances transparency, vital for economic confidence.
- 🔮 Future Economic Outlook: The combination of strong monetary policies, digital advancements, and anti-corruption measures creates a promising environment for Iraq’s economic growth.
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