Rivalry between the two

July 30th, 2012 07:00 am ·

«Auction» foreign currency which is organized by Central Bank of Iraq every day, in the form of the recent subject of debate between the Iraqi Central Bank Governor Dr Sinan Shabibi and former Minister of Planning Dr. Mahdi Al-Hafiz. «Weekly» accompanied the debate through an exchange of letters obtained a copy of them.

First message addressed to the governor to the former Minister of Planning, in commenting on the statement of the Secretary-General of the Council of Ministers on the Keywords revealed that the amounts smuggled out of Iraq in recent years is estimated at $ 180 billion, and that less than 5 percent of the transactions are conducted by legal means.

Shabibi said: that these amounts sold in «auction» foreign currency which is in the range of $ 180 billion, were used to import large quantities and variety of goods and raw materials and consumer goods, and the payment of pensions Iraqis living outside Iraq and therapeutic services, travel and religious tourism, as there is no government agency except for the central bank is able to provide the import of such material amounts in foreign currency to service the requirements of the Iraqi economy. He added that the amounts transferred are not money smuggled, but money was used to meet the needs of the Iraqi economy and citizens inside and outside Iraq, has banks open hundreds of letters of credit documented amounted to more than 100 billion U.S. dollars since 2003 and until 2011, was done through the legal It is not illegal, as published.

According Shabibi Central Bank of Iraq, and to the extent that monitors the movement of financial flows within the country and out of, it is considered of economic phenomena regular help in maintaining a stable financial system is based on competition in the market, and generates at the same time integrated into desirable in the international financial market , and open wide in banking transactions with the world.

He adds that the restriction of foreign exchange or regulate the flow of money emerging of citizens, the direction is not consistent with the fact that the Iraqi dinar be convertible are worth of hard currency in Iraq, adding that this is contrary to the freedom of foreign exchange and Iraq’s commitment to international conventions, and in particular the application of the provisions of the provisions of Article VIII of the Convention on the International Monetary Fund, which obliges member states the adoption of freedom of foreign exchange and the lifting of restrictions to the movement of citizens’ money, except for legal violations arising from money laundering and terrorism financing.

Dwells Shabibi in his letter he says: In the absence of any regulations or instructions governing the foreign trade, especially imports since 2003 and so far, it has become the central bank has two choices only two: either to strive and develop controls to regulate the foreign exchange, or stop once and for trade finance State because of the lack of regulations and instructions. It is impossible to go to the second option containing the cessation of foreign trade financing through the auction, because it leads to stop imports completely through the private sector, which arranges a devastating impact on the Iraqi economy, the central bank based on its own development controls to enter the window of the sale and purchase of currency foreign without being costly to do so under the provisions of its law in force or any law, regulation, or Help another window.

He went on Shabibi to say: that monetary policy its means different including the way the auction, which began the CBI painted and implemented since 2003, is one of the primary means in light of the economic system of the new Iraqi-based economy to a free and unrestricted, and that is enshrined in the Constitution and the law of the Central Bank, and monetary policy can not work alone in the absence of other economic policies, Calceash commercial and financial policy and investment policy and employment policy and tax policy and national development plan. It also can not load the Iraqi Central Bank and monetary policy problems faced by the Iraqi economy, especially that the CBI does not work on the basis of the style of the single window, and therefore can not act on behalf of the ministries and other departments to continue to use the money and the entry of goods into Iraq.




Constants The Following Dr. Mahdi Al-Hafiz to the letter of Iraqi Central Bank Governor Dr Sinan Shabibi a letter obtained by «weekly» also, a copy of which he said: The window sale of foreign currency, which calls it a Shabibi error «auction» is a channel for the delivery of foreign currency from the source first is oil, through the Ministry of Finance, to the private sector, a process that is a must in all cases in Iraq and similar countries. That the availability of foreign currency, from the source of government to the private sector of the constants of the economic system in the oil country, and this particular is not room for choice, and not monetary policy per se, since there is no need to channel run from somewhere to deliver foreign currency to the private sector. He said Hafiz: The administration of the bank of the window is not considered an interference in the exchange market, because the intervention – the concept – is supposed independence of the monetary exchange market, a complete supply in the event of a shortage of reserves and deduct the excess to add to it, and the World Bank represents the supply side of the market: The price exchange that has not changed in the last three years and sells quantity required under the approved price. The difference between sales and the Ministry of Finance of the bank and its sales to the private sector adds to its reserves. But saying to «defend the exchange rate equilibrium …» Evger irrelevant, because it sets the price and sell the amount required thereunder, and thus the market price in line with the official price.

Also, buy foreign currency from the ministry in exchange for the dinar, which is expansion of money supply, reduced sales to the private sector. And added to reserves in addition to offset the cash basis in the liabilities side of the balance sheet of the bank, and all the cash release after 2003 that the bank is due to a net buyer of foreign currency. The version of the cash purchase of the Central of foreign currency, there is no other way because the bank does not lend to the government and other Iraqi institutions, and we hope, once again, be described as cash transactions, as this approach helps to understand what exactly exercised by the central bank.

Concludes Dr. Hafiz to say: that the purposes for which used foreign currency bought by the private sector, is the product of the disposal of the same sector income and foreign currency freely, and there is no policy approved by the bank or others to influence the behavior of private sector income, in general, and savings in particular. Has provided the foreign currency he wanted the private sector for the purpose for which he wants, either for imports or current transfers or investment abroad.

And about what the bank says it was monitoring the internal and external flows, Hafiz wonder: How and what specifically was monitored by surveillance measures? He adds to our knowledge there is no documentation for these flows already a departure from or entry, except for the oil and return part of it which is sold to the private sector as outlined above, that if we suppose it was monitored by what is known about how he knows the consequences of this observation?

Hafiz says: that the reading of the Central Bank of the eighth article of the Convention on the International Fund was hasty and exaggerated, because the rule does not impose overall liberalization of the balance of payments, but the ongoing processes: Import and export of goods and services and other provisions. It is known that the Convention on the International Fund does not impose on Member States the freedom of capital movements in and out, on the contrary, as may be required to fund from the member to restrict capital movements if requested by a member of the assistance from the Fund’s resources, and convinced the Fund that the capital outflows from the reasons balance of payments deficit.

More than that, it was found that the provisions of the Convention until ongoing operations can be restricted by requesting Member allowances contained in Article 14 of the Convention. Such readings of the texts of international conventions do not help to improve the bargaining position of Iraq, and hope that the bank was keen on the independence of the economic decision of Iraq no less than keen to assert its independence from the Iraqi government.


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