Exchange market stability

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Exchange market stability

Post  Admin on Sat Sep 30, 2017 1:14 pm

27/9/2017 12:00 am

Dr.. In the name of Brahimi
The controversy over the issue of the sale of foreign currency in the Central Bank of Iraq has reached some of the calls of some of its opponents to close it, while others assert that it is the only way to stabilize prices in Iraq, and this controversy is sometimes escalated and sometimes weakened by a number of reasons and motives that They are often political.
As for the reasons and motives, the window represents a way to sterilize the currency in circulation and therefore represents the most important tool in achieving price stability as well as being the only way to cover imports that meet more than ninety percent of the need Market to goods and services.

In terms of alternatives, the State (represented by the Ministry of Finance) is the largest monopoly of foreign currency as a result of the nature of the Iraqi economy, where oil is the only source of foreign currency, and thus the inability of the private sector to contribute to the achievement of financial returns to the country as is the case in other countries. Turkey, for example, is achieving financial revenues of nearly $ 200 billion and therefore does not need the Central Bank of Turkey to intervene in the market to cover the need for foreign currency as long as the market is able to feed itself.

The window has largely become a natural reflection of the movement of financial policy governed by two factors: the first is the volume of sales of the dollar from the financial to the central and the second is the volume of government spending, which is a large part of the demand for foreign currency, so the greater the volume of sales of foreign currency from the financial to the Central Bank The latter's ability to meet the dollar demand through the window as well as the increase in the size of its foreign reserves, and the increase in government spending will negatively affect the size of reserves and thus the ability of the bank to meet the dollar demand generated.

Therefore, the monetary authority itself was found between price stability pliers and the size of the reserves. However, it has succeeded so far in managing this difficult equation, and here we must point out the important point that the absolute size of the foreign reserves of countries is not the true measure of the reserve's stability, Adopted in this aspect and which creates stability of the exchange market.


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