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Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability

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Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability Empty Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability

Post by claud39 on Mon Apr 29, 2019 7:33 am

Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability


04/29/2019





Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability 14861







Economy News Baghdad:

The Chairman of the Board of Directors of the Bank of Baghdad, Essam Ismail Sharif, that the Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability in spite of the circumstances experienced by Iraq.

"In 2018, the Central Bank of Iraq, through its strategy of managing monetary policy and strengthening the pillars of monetary stability despite the circumstances in which the country was going through, succeeded in overcoming these conditions," Sharif said in his annual report issued by the Bank of Baghdad. While maintaining the exchange rate of the dinar to the dollar within the parallel market prices. "
He stressed that "the Central Bank continued to provide short and medium-term credit lines to finance the economic sectors, including small and medium-sized enterprises within the preferential interest rate, and in the liquidity side work to pay part of restricted cash with its branches in Sulaymaniyah and Arbil to Iraqi banks."

He continued his leadership role in the development of electronic payment methods and the process of settling salaries in Iraq, and on the technical side issued the Central Bank of Iraq instructions for the application of capital adequacy according to the Basel III standard,  which began to be applied experimentally on the data of the third quarter and fourth and will be adopted from the year 2019 ".

He pointed out that "the Iraqi economy is expected to achieve growth of 6.5% during the year 2019, in light of improved macroeconomic factors and the deficit of the general budget of the state and the need for the country to reconstruction projects of infrastructure."

He pointed out that "the Bank of Baghdad has been able to grow its financial position and size of customer deposits and achieve a part of the qualitative and quantitative achievements at the administrative and regulatory levels and maintain liquidity and improve the quality of assets, which will maintain its position within the Iraqi banking sector," explaining that "the capital adequacy ratio reached 127% Which exceed the indicators of global requirements and the Central Bank of Iraq.

He pointed out that "to meet the requirements of customers at the bank has re-completed the spread of its distribution channels and develop, whether opening branches at their new sites and start rehabilitation of the branches of Mosul and Tikrit and Anbar to be within the branches operating in 2019 in addition to the expansion of electronic distribution channels in terms of exchange, A cashier and is planned to reach 62 cashiers. "





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Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability Empty Re: Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability

Post by claud39 on Mon Apr 29, 2019 7:57 am

I give you an example so that members of the forum see what is the parallel market that tell us in the article from above, good day to all!

Claud (Moose)



 Parallel market.Market performed in a course other than the official course.









[size=30]Why the dinar is quoted on the parallel market at 155 dinars one euro?[/size]




Bank of Baghdad: The Central Bank of Iraq has succeeded in strengthening the pillars of monetary stability Argent_109994075










Created in 1964, the Algerian dinar was quoted with the franc until 1973, 1 dinar for 1 franc, and against the dollar 1 dinar for 5 dollars. Since 1974, the value of the dinar has been fixed according to the evolution of a basket of 14 currencies with a depreciation between 1986/1990 of 4.82 to 12.191 (USD / DZD rate), of 150% followed by a second depreciation , about 22% in 1991.



With the cessation of payments in 1994 and following IMF rescheduling and conditionality, there was a further devaluation, by more than 40% against the US dollar followed in 1995/96 by a commercial convertibility of the currency. Algerian. Why is the value of the Algerian dinar so insignificant, 108 dinars for one euro and 77 dinars a dollar according to the price of Forex1 dated March 15, 2014, official price, compared, for example, with the Tunisian dinar next to 1.57 for a dollar, with the Moroccan currency, whose exchange rate is 8.05 for a dollar? On the parallel market, unlike its neighbors, where the gap is small, in Algeria,
I- The value of the dinar, a function of trust and a productive economy
Currently there is a debate on the revaluation and total convertibility of the dinar and for others on the devaluation of the dinar which would be overvalued. The Algerian economy is a fundamentally rentier economy, it contradicts the basic laws of the economy where any devaluation in principle should boost exports. In Algeria the slippage of the dinar has produced the opposite effect showing that the blockage is systemic. On the other hand, any revaluation and full convertibility would lead to a massive capital flight. The country's economy is dependent on hydrocarbons at 98% of exports and 70/75% of the needs of households and public and private companies whose integration rate does not exceed 15%, a revaluation of the Algerian currency would inevitably generate an inflationary tension leading to higher imports through internal consumption, propelled also by the improvement of a fictitious purchasing power since dependent on 70% of the hydrocarbon rent. For other experts, full convertibility is possible with the amount of Algerian foreign exchange reserves (192 billion dollars without the 173 tons of gold reserves) on 01 January 2014 and would reduce the parallel market and restore confidence in the money. In general, being aware that both foreign and local investors are wary of a stable currency administered weak, we must be careful, requiring a wide debate without passion. The real value of money, which is only a sign, a means of exchange (the tribes of Australia used the salt bars as currency) where we then went from metallic currency, to bank notes, then to checks and then to electronic money. Hoarding does not create value. It is work through continuous innovation, adapting to this increasingly interdependent, turbulent and ever-changing world that is the source of a nation's wealth. The value of money depends on confidence in the future of the economy and politics, of production and productivity, as we have shown in the analyzes of the classics of economics on "value". In fact, the essence of this situation lies in the malfunctioning of the various state structures as a result of the state's excessive interventionism, which distorts the rules of the market, which forces households and operators to circumvent the laws and regulations. . Thus when public authorities tax (excessive taxation) and over-regulate or by declaring the activities of the free market illegal, it skews the normal relations between buyers and sellers. In response, buyers and sellers naturally look for ways to get around the pitfalls imposed by governments. When a government wants to impose rules and laws that do not correspond to the real state of society, the society has its own laws that allow it to function. The foundation of a contract must be based on TRUST. At the level of the informal sphere, there are informal contracts that are more credible than those of the state because they are based on trust between the offerer and the applicant. That we visit deep Algeria and we will see thousands of contracts established by credible notables in different parts of the country in the presence of witnesses. Faced with the fait accompli, the State official has often regularized these contracts (particularly in the field of land and real estate). The state must be confined to its role as a strategic regulator and not distort the rules of free competition. In countries with managed economies, authorizations (as formerly in Algeria import licenses that some nostalgic want to reestablish) that allow those who have relations to sell but the market price aligning with the price of the parallel market giving these people who have relations therefore rents without productive counterparts. The parallel currency market does not escape these general rules with the administrative rating of the dinar. We have seen in the past that when the dollar fell and the price of the euro rose, the bank of Algeria devalued for political reasons both the dinar in relation to both the dollar and vis-à-vis the dollar. euro while the dinar in a real market economy was to appreciate against the dollar. Why this accounting device? The main reason is that by devaluing the dinar against the dollar, we will have an artificial increase in the taxation of hydrocarbons that fluctuates, depending on prices, between 60/70% of the total base of a rentier economy. For hydrocarbon revenues are converted into dinars, for example from 70 dinars to 77 dinars a dollar; the same applies to imports denominated in foreign currencies, customs duties being calculated on the dinar portion, this devaluation accelerating domestic inflation. All this hides the importance of the budget deficit and therefore the real efficiency of the state budget through public spending and artificially inflates the fund revenue regulation calculated in Algerian dinars. Inflation being the result,
II- The six reasons for the devaluation of the dinar on the parallel market
For decades, Algeria has had distortions between the official exchange rate of the dinar and that on the parallel market. Port Saïd square in Algiers, some places in the East and West are considered parallel open-air banks operating as a stock exchange where the price is changing day by day according to supply and demand and quotations at global level of the dollar and the euro. This black market plays as a softener to a too rigid exchange control. Although the data is often contradictory, some sources estimate between two and three billion dollars that would have traded, annually, on the Algerian parallel market between 2009/2012. The amount is extremely small in comparison with the outflows of currencies. For proof in 2013 more than 55 billion dollars of goods to which must be added $ 12 billion of services, therefore a total outflow of $ 67 billion. I identify six main reasons for this large gap between the official and parallel market prices.
1.-The gap is explained by the decrease in supply because the global crisis, combined with the death of many Algerian pensioners, largely offset the savings of emigration. This fall in the foreign exchange supply was counterbalanced by the fortunes regularly or irregularly acquired by the Algerian community locally and abroad, who regularly or irregularly transfer foreign currency into Algeria. The reconvention of the money of the corruption, playing on the distortion of the exchange rate with reference to the official (you invoice me 120/130 instead of a merchandise bought 100 with the complicity of foreign operators, Easier and faster trading) clearly shows that the parallel foreign exchange market is far more important than emigration savings, allowing real estate cats to explain price rises, especially in large cities and even in the United States. semi-urban areas. These amounts functioning as communicating vessels between the foreigner and Algeria, strengthen the offer. There is therefore a dialectical link between these outflows due to overbilling and the supply, otherwise the latter would be greatly reduced and the price on the parallel currency market would be higher, playing paradoxically, as a shock absorber at the fall of the dinar on the parallel market. These amounts functioning as communicating vessels between the foreigner and Algeria, strengthen the offer. There is therefore a dialectical link between these outflows due to overbilling and the supply, otherwise the latter would be greatly reduced and the price on the parallel currency market would be higher, playing paradoxically, as a shock absorber at the fall of the dinar on the parallel market. These amounts functioning as communicating vessels between the foreigner and Algeria, strengthen the offer. There is therefore a dialectical link between these outflows due to overbilling and the supply, otherwise the latter would be greatly reduced and the price on the parallel currency market would be higher, playing paradoxically, as a shock absorber at the fall of the dinar on the parallel market.
2.- The demand comes from ordinary citizens who travel: tourists, those who seek treatment abroad and hajis) because of the low derisory currency allowance. But it is the travel agencies that fail to benefit from the exchange rate right also use black market currencies as importers of services. Mostly they export currencies instead of importing as the tourist logic would like in Turkey, Morocco or Tunisia.
3.- The strong demand comes from the informal sphere which controls 40% of the money supply in circulation (with a concentration for the benefit of a rentier minority) and which controls 65% of the segments of the different markets; fruits / vegetables, red / white meat- fish market, and through the import using small resellers the textile / leather market. Because there is an informal financial intermediation far from the state circuits. At the level of this sphere which is the product of the bureaucracy, everything is treated in cash favoring dialectical links with certain segments of rentiers of the power and thus the corruption. The national union of Algerian traders estimate the tax evasion due to this sphere of about 3 billion dollars a year.
4.-The difference is explained by the move from Remdoc to Credoc documentary credit, (explaining the easing measures) in 2013, which largely penalized small and medium-sized enterprises accounting for more than 90% of the declining industrial fabric (5% in the GDP). Crédoc has not been able to curb the rise in imports, but has reinforced the trends of importing monopolists where according to the official 83% of the global economic fabric is made up of trade and small services with low added value. Many SMEs / SMIs to avoid supply disruptions have had to resort to the parallel foreign exchange market.
5.- Many foreign operators use the parallel market for currency transfer, since each Algerian is entitled to 7200 euros per trip transferred, using their Algerian employees to increase the amount.
6.-The difference is due to the level of inflation. On the strictly economic level, the currency is above all a social relation according to the level of economic and social development, expressing the confidence or not between the State and the citizen, the level of confidence its deterioration according to the level of the inflation of which the real rate is higher than the official one, an objective analysis of inflation supposing to grasp the dialectical links between development, the distribution of income and the consumption model by social strata. Whoever receives 200 euros per month does not have the same perception of inflation as the one who receives 30,000 euros. The non-proportionality between public expenditure programmed at $ 500 billion between 2004-2013 (no physical-financial balance to date) and low impact, the average growth rate of not more than 3% (it should have exceeded 100%) is a source of inflation and explains the deterioration of the dinar quotation (imbalance supply / demand that is replaced by a massive import) on the free market against the currencies that the bank of Algeria supports artificially through hydrocarbon revenues. The payment of wages without productive counterparts increases inflation and imports because Algeria has a very low productive capacity. To guard against inflation, and therefore the deterioration of the Algerian dinar, the Algerian does not only place his assets in land, real estate or gold, but a portion of savings is placed in foreign currency. Many Algerians benefit from the real estate crisis, especially in Spain, to buy apartments and villas in the Iberian Peninsula, France and some in the US and Latin America not to mention tax havens. It is a security choice in a country where the evolution of oil prices is decisive. If there were no oil and gas, and foreign exchange reserves, the euro would be exchanged at 300 or 400 DA. It is thanks to foreign exchange reserves that the official exchange rate fluctuates between 2012/2014 at 105/110 DA one euro. In the face of political uncertainty, and the psychosis created by financial scandals, many officials sell their property to buy goods abroad. Many households are also facing the prospect of a drop in oil revenues, and given the erratic fluctuations in gold prices, down since 2013, buy currencies on the informal market.
In summary, all this points to the weakness of a local productive fabric, the hydrocarbon rent gave an official artificial quotation. According to an OECD report, Algeria's labor productivity is one of the lowest in the Mediterranean. Subsidies and the distortion of the exchange rate between the official and the parallel market prices with neighboring countries are the fundamental explanations of overbilling where Algeria, after 50 years of political independence, 98% of hydrocarbon exports and 70% of the needs of households and public and private enterprises whose integration rate does not exceed 15%. By programming an unparalleled public expenditure since political independence, with exorbitant extra costs such as showed the report of the World Bank dedicated to infrastructures, (between 25/30%), by freezing the control mechanisms of which the Court of Accounts depends on the presidency of the republic, by creating institutions dependent on the executive being judge and the telescoping part, the most effective control being the democratization of society and the rule of law, and with the gap between the official and the parallel market prices, one could expect this outbreak of import and insider trading. This distortion with the quotations of currencies of neighboring countries, also explains the leakage of products abroad. by creating institutions dependent on the executive being judge and party being telescoped, the most effective control being the democratization of society and the rule of law, and with the difference between the official price and the price on the parallel market it was to be expected that import surge and insider trading. This distortion with the quotations of currencies of neighboring countries, also explains the leakage of products abroad. by creating institutions dependent on the executive being judge and party being telescoped, the most effective control being the democratization of society and the rule of law, and with the difference between the official price and the price on the parallel market it was to be expected that import surge and insider trading. This distortion with the quotations of currencies of neighboring countries, also explains the leakage of products abroad.
The administrative measures can only be punctual if it would require an army of controllers. The solution lies in a new governance, new regulatory mechanisms, which condition the revitalization of local production in value-added segments within internationalized sectors. This involves efficient companies (cost-quality) being in the era of globalization requiring integration into large groups whose Euro-African and Euro-Mediterranean spaces are the natural areas of Algeria thanks to a win / win copartenariat (shared currency balance, accumulation of technology transfer and local managerial) , the human resource being the essential pivot of cooperation. These are the conditions to improve the rating of the dinar, customs duties and subsidies being transitional with precise specifications for the beneficiaries of this annuity. A balance sheet of the benefits and the results of the beneficiaries of the different investment agencies (VAT exemption - subsidized interest rates) becomes urgent in order to avoid spending without counting for a fictitious social peace thanks always to the ephemeral hydrocarbon rent which is a blessing well used and a curse source of corruption and misuse. Remember the Dutch disease. It is that Algeria has been in transition since 1986, neither a market economy nor an administered economy explaining the difficulties of political, social, economic and financial regulation and thus the transition from an economy of rent to an economy outside hydrocarbons,
Abderrahmane Mebtoul, University Professor and International Expert




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