The latest…annual Article IV Consultation…done last September clearly states…”The authorities have appropriately maintained the exchange rate peg.” This was done to help accomplish exchange rate stability in Iraq thus allowing the CBI to get in compliance. Telling people the dinar is already on a managed float…is outright false and not what is going on regarding monetary policy at this time. The CBI is working hard to meet compliance so that they can move forward and engage their banking system with the world.
In order for the dinar to go up in value several other things must occur the Central Bank of Iraq for one has to rebuild the banking sector. …the central bank has to meet the conditions set forth by the IMF. And…they must be in compliance in order to move from Article XIV to Article VIII. This compliance has not been achieved since 2012. And this compliance started again in March of 2018. Back then I told everyone that there would be a minimum of a 90-day window and which the CBI needed to hold such compliance …it’s in writing and factual. Since then the CBI has done an excellent job maintaining the 2% compliance requirement to move to Article VIII under difficult circumstances within the country, this doesn’t mean they will move today or tomorrow because other factors still exist which could still hold this up.
In order for Iraq to engage its banking system with the world’s financial system It’s a combination of government effort and financial stability/compliance. And again as we stated several months ago a new government would need to be formed, stability and security would have to be proven as well as any other legal or laws necessary to perpetuate the investment process. That being said there is a sense of urgency in Iraq to move Iraq forward now rather than later because Iraq needs money to rebuild and private investment is that solution. Bringing an influx of capital into a country will create substantial inflationary pressure through the CBI capital account…this has to be accounted for and that’s why the CBI must move off of the peg to a float prior to such action.