MilitiaMan: Mechanism for opening government documentary credits with private banks
24th June, 2020
Mechanism for opening government documentary credits with private banks …
Banking Supervision Department 97/30 2020/9/23: NO: Date: Ministry of Finance/Financial
Accounting Department Opening governmental documentary credits with private banks is a
good greeting ..
Based on the decision of the Cabinet of Ministers of Economic Affairs
in its sixteenth session held on 2019/7/ 5 Concerning the issue of opening current accounts
in banks, a mechanism for the self and central funding departments to use them for
the purposes of opening documentary credits exclusively without the mediation or
And with reference to Article (49) of the Financial Management Law Federal No. (6) for the
year 2019 including the following (allowing the unity of the agreement or self-funded
administration to open a current account with the opinion of a government or private bank
MilitiaMan: I am revisiting this one for to make a point. A Documentary credit or “Letter of Credit” is to facilitate trade payments internationally. They are used to make sure things are fair and run smooth.. Being internationally accepted in the world requires countries to play on a level playing field.
They also have rules with strict enforcement’s that come with the D/C or L/C, if you will. As noted above, they address the exchange rate and time frame for clearing.
If they don’t clear within the 5 day window they will have consequences that can halt their ability to trade for 6 months. Most will understand that and they will act and proceed accordingly.
Lets keep in mind they are using 1200 as their reference to the exchange rate. Well that is because imo they have to..
They cannot give out the international exchange rate with out properly announcing they are Article 8 compliant by actually raising the value of the exchange rate.
So they use the example of the program rate. imo. Keep in mind they are telling us they are going to use the D/Cs. That means they are telling us they are about to change the value of the exchange rate to be internationally accepted and imo that will cease the Multi Currency Practices (MCPs) they have been using.
They told us they have a new mechanism to come for the customs and borders. We see above they use the word mechanism in respect to the D/Cs. Shipping comes in to the ports, which are borders too. So the new PM has been telling us even today that they have a system in place now.
We were also told on our around 06/01/2020 that there will be adjustments at the borders for taxes, fees and or tariffs.. The system is block chain oriented for transparency.
They want the money to make to the Federal level and not into gangs or mafia pockets. So, the timing of this is by design. Telling us they are ready to go imo. ~ MM
DELTA: GREAT JOB MY BROTHER …….AS USUAL ONE OF THE BEST….
Don961: Clarification on foreign reserves in the Central Bank of Iraq
June 25, 2020
The real financial surplus is the government’s revenue that is represented by the Ministry of Finance, which exceeds its public expenditures during a fiscal year. If the Ministry of Finance achieves revenues (crude oil sales in general) with a value greater than its expenditures (investment spending and current spending), it will achieve a budget surplus.
That the government invest it, either internally or externally in the form of sovereign funds or investment funds, etc., and vice versa if public revenues are less than expenditures and then achieve a real deficit that requires its financing, either by searching for additional revenues, enhancing existing revenues, or resorting to internal borrowing and / or Outer.
Here it is necessary to clarify that the foreign reserves held by the Central Bank are not surplus funds, but rather accumulate as a result of a specific mechanism in which the Central Bank conducts what is called the process of monetization, as the Ministry of Finance sells the largest part of its dollar revenues to the Central Bank with a view to obtaining the Iraqi dinar Issued by the Central Bank of Iraq to implement its domestic spending, and as long as the Central Bank of Iraq adopts a fixed price to exchange the Iraqi dinar against the US dollar, and it seeks through the window of selling the currency to maintain this constant value of the dinar, so the Iraqi dinar holder has a right to foreign reserves, which is a cover for the local currency .
We can refer here to the concept of foreign reserves according to the balance of payments guide and the international investment situation issued by the International Monetary Fund (are the external assets that are at the disposal of the monetary authority and are subject to its control to meet the needs of the balance of financing payments or interference in the exchange markets to influence the exchange rate of the currency, or other Related purposes (such as maintaining confidence in the local currency and forming a basis for external borrowing) and the reserve assets must be assets in foreign currency and assets that already exist, and excluding potential assets.
The concept of reserve assets is based on the concepts of “control” and “accessibility” With regard to monetary authorities, based on the definition of foreign reserves above, the following can be installed:
1. It provides a cover for the local currency and an instrument to support the exchange rate.
2. It is the primary tool of the central bank to intervene and adjust imbalances of the balance of payments structure.
3. It provides an important element in setting the country’s creditworthiness, and enhances the country’s credit rating in international transactions.
The optimal level of foreign reserves – that is, the minimum value of foreign reserves that the monetary authority must possess and that is calculated according to internationally approved standards – represents the ability of the monetary authority to defend the local currency exchange rate. The most important of these standards (the money supply standard, which represents the adequacy of foreign reserves to cover the supply of the local currency, and the trade standard, which represents the number of months in which foreign reserves can finance the country’s imports of goods and services) and adopt these standards assuming a shock that affects the accumulation of foreign reserves almost Exactly.
With regard to managing foreign reserves, there are internationally accepted rules that depend on managing foreign reserves in terms of their liquid assets (securities, deposits, gold …) and it envisions geographical distribution, currency diversification and other factors that reduce exposure to risks and provide returns that ensure sustainability These reserves.
It should be noted here that for internal borrowing by the government, whether funded by the Central Bank of Iraq directly any direct deduction of securities issued by the Ministry of Finance – which is prohibited by the Law of the Central Bank of Iraq – or indirectly by deduction in favor of local commercial banks, for both A negative impact on foreign reserves if we assume that the government’s priority is to finance that part of the expenditure represented by workers ’compensation, as this part is reflected in consumer spending, which is mainly met by imported goods and services, which in turn will generate a derivative demand for foreign currency and hence the exit of a portion Of foreign reserves to finance these imports, and this effect will continue until the date of maturity of the securities.
While external borrowing will positively reflect on the accumulation of foreign reserves, as long as the Ministry of Finance will monetize it for the purpose of obtaining the local currency, and handing the foreign currency to the central bank to be added to the foreign reserves. link
MilitiaMan: This is not talking about the program rate we are at now. It is talking about the future imo.
It is talking about what will be done when the exchange rate is internationally accepted.. It will be a time for them to act accordingly and they give the examples on how they are going to do it.
They will have the ability to defend their new exchange rate as they have tools to or mechanisms to do so. They will do it in their local currency, hence, they’ll need to defend the new rate with those tools. They will also monetize their new currency, whereby, it derives an income to help with payments..
This article ought to be one we all smile about.. Because they are not doing this now at a program rate. imo.. They are gearing up to use the tools for a new exchange rate and it appears they are ready to act on a moments notice.. imo.. This is timed accordingly..
The 60 day time frame the PM mentioned is not about this part of the reforms. They told us about the border crossings and adjustments in respect to shipping contracts, taxes, fees, tariffs, etc..
That is to be for 07/01/2020. I have not seen or heard of them pushing the borders or adjustments out. In fact it appears with all the articles out the mean to implement on time.. imo. jmtc ~ MM
JJimmyJJ: Truth!! Until the last 30-45 days when things started being done on time, when have we seen this happen before? NEVER.
IMO, if you want to see the biggest pattern- breaker of all, I think this urgency and respect for timing and deadlines has to be in the running.
Security and stability? Check
A govt who are interested in something other than stealing? Check
The int’l world being happy with Iraq? Check
Iran on the sidelines? Check
Sudden respect for deadlines and actually completing what they talk about in the GOI and CBI? CHECK
IMO, they sure seem like they’re ready, packed, and anxious to start this RI adventure. And, that’s good, because this adventure has almost killed me.