The Prime Minister’s Advisor for Economic Affairs, Mazhar Mohammed Salih, denied the existence of a problem with the liquidity of the Iraqi currency.
Saleh said, in an interview followed by / Al-Maalouma /, that “there is no problem with liquidity at all because it is covered by foreign currency,” indicating that “the mechanism for obtaining cash liquidity is that oil sales are converted into US dollars, and when the government needs the dinar for internal exchange, it exchanges oil sales for dollars and goes to the cash issuing bank, which is the central bank, to give it the currency.”
He pointed out that “the Central Bank, in order to maintain market stability, sells foreign currency to the market through a currency sale window and auction, to withdraw liquidity again and then repeat it again to achieve natural growth in the issued currency.”
He pointed out that “Iraq was exposed last year and early this year to compliance issues, and there was a major audit of financial transfers and there was a failure in about 70% of transfers, so this doubled the absorption of liquidity,” adding that “foreign assets are present, but the sale of these assets in the market does not match the government’s sale of foreign assets to the Central Bank.”
Mazhar Mohammed Saleh noted that, “In this case, when the government wants liquidity in the Iraqi dinar, the monetary issuance increases, meaning instead of absorbing it from the market, a new issuance takes place, and this is what led to a jump in the issued currency, but there is no problem with that because it is 100% covered.”
Regarding the size of the monetary mass, Mazhar Muhammad Salih explained that “there was an increase in liquidity during the year, as the issued currency became around 100 trillion dinars, after it was 80 trillion dinars,” stressing that “these booms do not have an impact as long as they are covered by foreign currency.”
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