Central independence required provided that accompanied the government oversight

22/04/2013 12:00 AM

Former minister d. Raed Fahmi "morning":
Baghdad - شكران the Fatlawi


Placed accounted for the independence of the Central Bank received wide attention by specialists and those interested in economic affairs and the leaders of a broad debate on the role and independence of the central and its relationship to the executive branch.

In an exclusive interview for the "morning" with former minister d. Raed Fahmi on the sidelines of a seminar hosted by the Iraqi Institute for Economic Reform in this regard he said: that the independence of the Central Bank is required and desirable, provided that is consistent with the role and supervision from the government Some of the activities entrusted to the central bank out of part of the formulation and implementation of monetary policy to combat money laundering and the control and supervision of banks and put controls on it.

Fahmi said that the controversy over the central bank and the nature of its relationship with the executive and legislative powers and its role in policy-making cash to the country where she mixes political and technical considerations specialist in a discussion تضبب and pay تحرفه trends on key issues and the implementation of sound economic policy and effective تستنهض the national economy and check the conditions of development.

He added that necessarily requires compatibility and harmony between the two policies of fiscal and monetary integration work and doing political tools for each of them in order to achieve economic growth and rebuild and modernize and develop the physical infrastructure and institutional capacity and diversify the productive base of the Iraqi economy as well as social objectives and distribution and dispose of equitable resources.

called to put issues over the controversy on the Central Bank in its proper context, away from the heated political disputes for the sake of discussion leads to the findings and conclusions contribute to the visibility of the state's economic and evaluate the performance and upgrading institutional building State and effectively the economic and financial policy tools and cash.


He said there are two basic Moduatan interrelated stirring controversy, if the transfer of political struggle and intellectually Mandmin, the first relating to the independence of the central bank and the other to its policy in the fight against inflation and stabilizing the exchange rate of the Iraqi dinar against the dollar. Regarding ordered the independence of the Central Bank , the text of the Constitution in Article 103 that the CBI is an independent body, financially and administratively regulated work law and be accountable to the House of Representatives.

Work is still ongoing to the Central Bank Law No. 56 of 2004 issued by the Coalition Provisional Authority (CPA) despite the fact that its release prior to the Constitution, this law identified the objectives and functions of the central bank in the material (3) and (4) of Part One, where they were identifying the main objective of the bank "is to strive to achieve and maintain the stability of the domestic price, promote and maintain a stable financial system is competitive and based on the market, according to the Central Bank shall also promote sustainable growth, employment and prosperity in Iraq."

pointing out that the goals of the Bank include the fight against inflation and stabilize the financial system, which is wider than the monetary system, as well as to promote sustainable growth and employment.

The Bank is working to achieve these goals through the exercise of the functions specified in Article (4) and the most important, "the formulation and implementation of monetary policy, including exchange rate."

He added Based on these constitutional and legal provisions, the central bank considered enjoy full legitimacy in the exercise of his authority to formulate and implement monetary policy independently.

The central bank make the goal of combating inflation axis and the center of its procedures and employ his tools targets linked to the bank and the obligations of Iraq as part of a program of economic and financial reforms with the International Monetary Fund and its requirements to support Iraq's request to ease the burden of foreign debts to the Paris Club.

In this context.

Fahmi said that the central bank use monetary policy tools available to him, and in particular recruit Iraqi dinar exchange rate as a means to control inflation and restrain him.

For this purpose, the central bank intervenes in the foreign exchange market to raise the value of the dinar against the dollar and the defense of such high value of the dinar to meet all the demand for the dollar at this price through the sale of dollars to banks and money transfer companies licensed in the currency auction organized by the bank.

and reiterated in our opinion, the understanding and practice السائدتين the road to the independence of the Central Bank and the monetary policy needs to review and debate serious transparent and scientific objectivity is the premise and foundation in which access to the harmonious economic policy and effective and efficient will achieving the goals of sustainable economic development and stimulate the growth and expansion of employment and the development of the productive sectors and raise the standard of living for all citizens., and pointed out that the central bank's policy over the past years focused almost exclusively on the curb inflation and lower rates without Circulating attention required for the goal of sustainable growth and combating unemployment and also set forth the objectives of the bank, but has been adopted policies may conflict with those objectives, as happened during the years in which interest rates rose to very high levels played a brake on investment to raise the cost of borrowing and encourage banks to deposit their money and liquidity at the central bank rather than directed towards credit to businesses and individuals, and that the policy of the high exchange rate of the dinar against the dollar and calculating the cost worthy to be the subject of debate, it will encourage import and weaken the international competitiveness of Iraqi products, they also reduce the amount of Iraqi dinar available to the general budget and government spending compared to dollar-denominated oil revenues that the government is turning it into Iraqi dinars with the central bank.

noted that the objective of the these observations is marking the conflict which may arise between the goal of monetary policy adopted by the Central Bank and the other important economic targets may be among the priorities of the government's financial policy, and the safest way to avoid a large gash imbalance between the arms of economic policy the state, fiscal policy and monetary policy, is to achieve harmony in the objectives and provide effective mechanisms for coordination and interaction between devices and those responsible for the design and implementation of the two policies.

Fahmi called for the need to apply the principle of the independence of the central bank, and offers many experiences from developed countries are clear examples of the partnership between the government and the central bank in setting monetary policy.

So we do not find a conflict between such an understanding of the independence of the central bank and the provisions of Article (110 - III) relating to the competence of the federal authority that included "formulating monetary policy and the establishment of the Central Bank and his administration" including.

It is a paragraph related to the central bank as a federal authority, to point out that "monetary policy" came before "the establishment of the Central Bank" in the said paragraph.

He practically and objectively central banks do not have only a limited margin of autonomy in the control instruments of monetary policy in the oil countries, such as Iraq, where the money supply is determined primarily by the foundation of fiscal policy and government spending and quantities of hard currency, which converts the government into the local currency at the Central Bank, which constitute the largest proportion of foreign assets at the bank and the main base for the amount of cash version, on the other hand, interest rate is not only limited impact on the credit and economic activity due to lack of financial depth of the economy Iraq, which does not exceed the ratio of financial assets to GDP, 13 percent, compared to more than 400 percent in developed countries.

He added impetus for any confusion in the understanding, confirm that The Mhajajtna not intended in the foregoing, compromising the principle of the independence of the central bank or minimize its role and its importance in preventing the government resorting to monetary expansion to finance the budget deficit and the consequent inflationary pressures lead to an accelerated rise in prices and a decline in the value of the currency and its purchasing power, which in turn leads to the effects of social and economic consequences are reflected in the deterioration of the pension conditions of low-income groups and low-income, and imbalances in economic activity.

Valastqlalah desirable and are required to be highly consistent with the reality of the country and the circumstances and to be associated with the appropriate government oversight, especially as some of the activities assigned to the central bank out of part of the formulation and implementation of monetary policy, كمكافحة of money laundering and control and supervision banks and placing controls on their work. Such cooperation and coordination with the government and fiscal policy also required the anti-inflation process itself.

Inflation in Iraq is not due to monetary reasons and by, but his structural factors regarding the circumstances of processing and supply of goods and services does not affect the tools of monetary policy alone, but concerted Sanitary fiscal and monetary policies and the implementation of development programs that change the economic structure .


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