The Central Bank and wasting money year

The Central Bank and wasting money year


2013/05/06
Dr. Sinan Mohammed rida Al-Shabibi *

Excited much talk about foreign currency auction, hosted by the Central Bank as a waste of public money, and I would like to make some further thoughts on this topic.


1) there is no waste of public money as a result of the auction process, making her dinars to banks, the Central Bank, the dollar is replaced by using its foreign exchange reserves, according to the exchange rate, and therefore we are to swap cash disbursement. In other words, we don't give a dollar for free, so we are not to lose. The Central Bank shall receive 13 dinars for each dollar converts it. Central Bank of wasting money if we give free dollar or dollar swaps in dinars preferential exchange rates.

The Central Bank also said public money wasted because it sells large quantities of dollars. But the sale of these quantities is in response to the request of the buyers, who represent commercial banks. It is very important that each request is an interview on the dollar after a bank audit in terms of banking, offenses and after the Bank has provided a citation that the students had undergone Audit Office money laundering at the Bank. To meet each request is essential in monetary policy, but the request does not meet him and saturation by the Central Bank will go to the market to satisfy his need to the dollar from another source, which will create another Exchange rate is necessarily higher than the Central Bank, so we will be in front of multiple rates of Exchange on the Central Bank and the local market. This would contravene the law of the Central Bank (rule # 3) and would hinder economic decision-making and distorts the price level. The International Monetary Fund which is Iraq the first signatories of the Convention says that the difference between the two prices (the rate of the Central Bank and market price) must not exceed 2%. At present, under the new administration, that the difference between prices close to 8%.

When the Bank sells dollar it is monetary policy and not a commercial operation, selling the dollar pulled the dinar from circulation and relieves inflationary effects (the primary objective of the Central Bank), which serves to rationalize spending and lead to reduce wastage of public money.

The change in the exchange rate is not a waste of public money and satisfy the demand for the dollar is not a waste of public money and must equal supply and demand to stabilize the price (the first objective of the Central Bank as stated). These market operations and our economy is an economy in transition to a market economy and openness as this accompanied by fluctuations in demand and supply affects the movement of cash. The important thing is to return the market to stabilize.

I've just reminded us that the difference between the exchange rate of the Central Bank and the market price under the current administration is about 8%. The Bank did not indicate the cause of this difference, we believe that economically due to the failure of the Bank to satisfy every demand, leading to this disparity between the Central Bank and the market price, and this is contrary to article III of the law on the Central Bank. This disparity must be addressed (note that increased), and the old Administration has faced some imbalances and fluctuations in the exchange rate at the beginning of 2012 as a result of the high demand for the dollar because the US withdrawal at the end of 2011 and other regional conditions but the Administration managed to restore stability in the third week of September 2012, with the price of the dollar amount. 1196 Conclude if it according to the principles and the law of the Central Bank, there was a waste of public money, the first Central Bank to sell dollars for dinar, and secondly that the Bank in its work that meets the demand for the dollar and maintaining the stability of the exchange rate and domestic prices and provides the appropriate environment to keep the money and use it productively, which promotes sustainable development and contribute to job creation, as described in article 3 of the law on the Central Bank.

2) Central Bank sells dollars to banks that sold to customers for use in import of goods and services, and the business process and not the cash it gets outside the Central Bank, after that comes out of the Central Bank. So these business process is not related to the Central Bank, but is related to the various uses to which the dollar may be used for medical purposes, or for the purchase of certain assets or the holder may resort to so-called external saving for economic, security and political conditions improved and pending investment environment so this savings in whole or in part to Iraq.
This means that the Central Bank should not be blamed if importing a small proportion of the amount granted, the Central Bank should not be held accountable for the business process. It is possible that the Central Bank be held accountable if there is a bug in Exchange for dinar, any cash operation. The waste of public money as a result of the business process, although its importance is not within the work of the Central Bank.

3) Central Bank to provide a copy of the requests for transfer submitted to the auction Commission to combat money laundering and terrorist financing in the Bank for the detailed follow-up (including follow-up to doubtful operations) Although the bank concerned to provide us with the martyrdom on the absence of money laundering operations. This circuit is that it must mainly be diagnosed and pursue money-laundering operations and the financing of terrorism inside and outside Iraq and (according to the anti-money laundering Act of 2004) to do so directly, without reference to the Bank's Governors, Department of money laundering maintain independence of operations. The subsequent follow-up, it is very important not to hamper the exchange rate and price stability. We must remember, as noted above, the domestic price stability is the primary objective of the Central Bank according to article 3 of the law on the Central Bank. Auction committees receive a citation from the banks about lack of money laundering operations, but it should not hinder the flow of financial flows and exchange rate stability. The money laundering that receive a copy of the auction directly is that you must scrutinize the money flows in detail.

And can sum up what mentioned in points (2) and (3) that the fate of the foreign currency that supportive Central Bank meeting the Iraqi dinar in the auction process and ending his mission here is to go through commercial banks to finance different types of imported goods and services and other uses that we mentioned earlier. All requests for transfer is given to the Department of money laundering which must follow and determine the fate of the foreign currency particularly suspicious of them and tell the security authorities directly.

4) it is important to point out that there is no restriction on transfers to current payments according to article VIII of the Convention on the International Monetary Fund, which was one of the first institutional Iraq and one of the first signatories to the Convention on 27/12/1945. In addition, the free transfers included memoranda of economic and financial policies with the International Monetary Fund held and signed by the Minister of finance and the Governor of the Central Bank. We wish to clarify that all restrictions were removed after the abolition of the foreign exchange Department of the Central Bank in 2003.
* Former Central Bank Governor