The economic advisor to the Prime Minister, Mazhar Muhammad Salih, explained today, Saturday, precise details about the importance and reasons for the Central Bank of Iraq’s decision to reduce interest.
Saleh told {Euphrates News} that: “It is clear that the monetary policy of the Central Bank of Iraq has become a policy that meets the requirements of growth in real economic activity, through activating its operational objectives aimed at reducing the cost of credit and financing within the joints of the economic system in general and the banking system in particular.
He explained, “The Central Bank began, through its decision issued in accordance with its circular on October 24, to reduce the monetary policy interest rate (which is the rate at which the Central Bank of Iraq deals with the banking system) by about 200 percentage points, by lowering the interest at which the Central Bank deals with banks from 7.5% to 5.5%, which means that the Central Bank of Iraq has become following an expansionary policy in targeting the money supply in a manner that is consistent with activating the real sector in the national economy and confronting unemployment indicators in the overall economy.”
According to the statement of the Prime Minister’s economic advisor, “Despite the above, the bank in its new policy did not neglect the importance of continuing to control local liquidity levels and carrying out high sterilization operations, by offering debt instruments called Islamic certificates of deposit with a return that increases with the length of the amortization period of those securities purchased by the banking system, which are considered sovereign debts that can be mortgaged or discounted in the secondary market and are excellent debts.”
He continued, “The monetary policy of the Central Bank has given a signal 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 goal.”
Saleh concluded by saying, “Between expanding the movement of economic liquidity as an expansionary policy and imposing control over liquidity levels by offering debt instruments in return at the same time in parallel, we can call the current monetary policy of the Central Bank of Iraq a {hybrid flexible monetary policy}.”
The bank decided to reduce the interest rate from 7.5% to 5.5%, in addition to reactivating the securities (Islamic certificate of deposit and money transfers) according to an annual plan and with two terms: with a return of 4% for a period of 14 days and a return of 5.5% for a period of 182 days.
