Samson: Is there a threat to hard currency reserves? The central bank explains
14th February, 2021
The Central Bank of Iraq ruled out, on Sunday, the existence of a threat to hard currency reserves as a result of borrowing, indicating that the oil market recovery maximizes the reserve.
The Director General of the Accounting Department at the Central Bank, Ihssan Shamran, said, according to the official agency, that “the dollar reserve of the Central Bank is not directly affected by the borrowings that the Ministry of Finance makes from banks,” noting that “its impact is indirect and limited.”
He pointed out, “The Central Bank monitors and ensures the safety of Iraqi dinars that are handed over to traders to buy dollars for fear that their sources are unknown or related to money laundering crimes, after which the dollar is delivered.”
He explained that “the market now feels a little relaxed (Having had time get over the shock from it. imo ~ MM) after changing the exchange rate, which contributed to reducing the import process and creating competition between Iraqi and foreign goods,” noting that “changing the exchange rate (Again, imo. ~ MM) will help the national product in marketing its goods after the imported goods have become high in value (Expensive due to devaluation, imo ~ MM) by about 22%.”
(22% of the value of the IQD was lost, hence products went up in price and inflationary event. Not good for the Citizens and against the White Papers and the IMF.. imo ~ MM)
He pointed out that “the change in the exchange rate made by the Central Bank in favor of supporting the national product against the importer.” He continued that “the recovery of the oil market would maximize the hard currency needs and reduce the deficit in the general budget for 2021, noting that the dollars collected from the oil sales differences will strengthen the foreign operation reserves of the central bank, and this will also reduce the pressure on the bank’s reserves of currency.” LINK
What happens when exchange rate decreases?
- If the dollar (dinar) depreciates (the exchange rate falls), the relative price of domestic goods and services falls while the relative price of foreign goods and services increases. 1. The change in relative prices will increase U.S. (Iraq) exports and decreaseits imports.
The exchange rate has an effect on the trade surplus or deficit, which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper.Mar 20, 2020
How does currency devaluation affect imports and exports?
First, depreciation (devaluation) of currency increases the volume of exports and reduces the volume of imports, both of which have a favourable effect on the balance of trade, that is, they will lower the trade deficit or increase the trade surplus.
MilitiaMan: Emphasis is mine to (Iraq)…~ MM
Is it better if the exchange rate is higher or lower?
A falling exchange rate can be beneficial if the economy is uncompetitive and stuck in a recession. A devaluation helps to increased demand for exports and create jobs. … However, in a boom, a devaluation could lead to inflation. Also, a devaluation does reduce living standards as imports become more expensive. Sep 10, 2019
IMF per Article IV Consulatation:
Directors emphasized that reducing fiscal imbalances is critical to ensuring fiscal and debt sustainability. They welcomed the authorities’ planned fiscal reforms in the “White Paper” and encouraged their careful prioritization and swift implementation while minimizing the impact on the vulnerable. To create room for the much-needed reconstruction and social safety nets, Directors highlighted the importance of strengthening public finances.
Directors concurred that the recent exchange rate adjustment would help reduce external imbalances and preserve foreign exchange reserves. They underscored that a strong fiscal framework remains critical to ensuring the credibility of the “new exchange rate peg” as well as minimizing future need for monetary financing of the budget. Directors also saw need for further monetary policy measures by the “central bank to contain inflation.”
“The price of the dollar will remain as it is now until the “coming of another budget”, “whether supplemental”
(Highly likely, imo ~ MM) or the 2022 budget ( Goinig out that far to 2022 is inflationary, not going to happen, imo ~ MM), then it will be possible to change the price if the government has a large abundancethat helps to overcome the expenditures of budget pressure.
MilitiaMan: The Central Bank is not lying about what they are saying at present nor would they, but, keep in mind what they are to do in the short term will have another effect, as well other than just stimulating job creation, opening doors to investors, etc..
Once the playing field is leveled (digitized) within the region and globally, and the IQD exchange rate becomes an international one the differential in value pricing of the IQD will be a mute point in regard to the above, imo.
As the introduction of the new rate will be treated vastly different than a program rate. imo. Not to say they will not have to defend the rate to contain inflation while still be competitive in the markets of the region, etc.. ~ MM
So, if we keep in mind it is not the CBI’s job to lie to anyone and it is not their job to hold our hands along the way through the reform process, but it is their job to inform the world with reasonable and accurate data. A requirement of international standards.
Now also keep in mind they muddy waters when doing so. It takes a keen eye and an open mind to the larger picture to glean the wheat from the chaff. However, in other cases there is specific data on reform issues.. Ones that say there is interconnectedness, integration and implementation.~ MM
“３. Enhancing communication between project officials and work teams on matters pertaining to each project, and coordinating the interconnectedness of the various projects within the reform program with the aim of enhancing integration and synchronization in implementation.”..~ Deepwoods post 50 Feb11
MilitiaMan: That there statement is data that is supporting a new process within the White Papers in regard to reform shows change is coming. Change that is not to harm the vulnerable!!. ~ MM
There is also pressure from neighboring countries and one to note is Kuwait.. Kuwait just differed debt payments for reparation’s again. They do this at a time now while under scrutiny with respect to their currency peg. So, think about it, with Iraq ready to change their currency again, those that hold the Dinar will rise with the tide. I’ll bet the deferral, was well orchestrated.. By design and timed accordingly.. Good things this way come.. imo ~ MM
He added, “The government wanted to put the parliament in front of a fait accompli, which is fixing the price of the Iraqi dinar at a value of 1450 against the dollar, which is a decision that does not carry any economic justification.” In the local market. ” ~ post 50 Deepwoods Feb 11
The economic expert, Wissam Al-Tamimi, believed, earlier, that there is no justification for keeping the dollar high in the local market, pointing out that the siege of the people must end before the street explodes due to mishandling of the citizen’s pension.” ~ post 50 Deepwoods Feb 11
Don961: Representative economy: The US embassy intervened by changing the exchange rate of the dollar
08:42 – 14/02/2021 The information / Baghdad ..
The Parliamentary Economic and Investment Committee revealed, on Sunday, that the US embassy in Baghdad had interfered with changing the exchange rate of the dollar, which sparked a wave of popular discontent and affected the poor classes, returning the current US presence as an “occupation.”
A member of the committee, MP Hamid al-Mousawi, said in an interview followed by / the information /, that “the American embassy in the capital, Baghdad, interfered with the economic paper that the government of Prime Minister Mustafa Al-Kazemi announced earlier.”
Mousawi added, “The US embassy also intervened with the issue of changing the exchange rate of the dollar, which the government had recently approved.”
“The current American presence is an occupation, in contrast to the House of Representatives decision, which stipulated the removal of all foreign forces, headed by the Americans,” Moussawi, a deputy for the Al-Fateh Alliance, said. End / 25 LINK
MilitiaMan: Sorry, but it wasn’t the USA Embassy it was the IMF and the GOI.. But, they are not wrong in that the move harmed the vulnerable, which did work to get 3 zero notes from them while increasing inflation. If I was a citizen of Iraq the move would have ticked me off as it did them. This is a hit piece by Al Fateh to put the blame on the USA. Lets not forget that the State Law Coalition / Maliki the other day is in support of changing the exchange rate again. Just as the IMF has stated there would be another change in early 2021. ~ imo ~ MM
Asa’ib Ahl al-Haq split from the Sadrist Movement in 2004. It has also been one of the main Iraqi armed groups active in the Syrian Civil War. They have received funding and training from Iran’s Quds Force and, like many Sadrists, are reported to have religious allegiance to the Iranian Grand Ayatollah Kazem al-Haeri. AAH formed a political wing, called the Al-Sadiqoun Bloc, to contest the 2014 Iraqi parliamentary election, winning one seat.”
Solorat: I thought when I read that sounded a little weird blaming the USA. Imo