The underlying reasons for the rise in the exchange rate of the Iraqi dinar in the parallel market Articles

Dr.. Appearance of Mohammed Saleh

The monetary policy of the Central Bank of Iraq aims to find a monetary framework near the exchange rate of the dinar in the parallel market in a manner not far from the exchange rate of the official monetary policy and the difference is the natural difference of the homogenization of the money market and balance at a real rate of 2% approved globally not to spend in the long period.

The objective is at the same time to balance the exchange market in the market, which is sought by the monetary authority through the procedures and processes of monetary policy continued short-term.

The factors and reasons that indicate today the rise of the dinar against the dollar (as sometimes called, in the parallel market Iraq In the decentralized market or the decline of the dollar by the convergence of the dollar exchange rate parallel to the dinar with its price from the official window of the Central Bank of Iraq) is mostly due to three main factors:

First, the ability of the central bank to meet the demand for foreign currency by Mazid or the window of the bank as a monetary policy and comfortably and disciplined, especially in the flexible application of the standards of banking compliance and the second, are speculative speculators optimistic value of the dinar, which is indicated by increasing the value of proceeds of oil sales in foreign currency and rising and achieving The current account surplus of 25 percent of payments was accompanied by the suspension of the government's borrowing from the central bank in the dinar, which increased its balance due to the intensification of the financial crisis. (Ie, stop betting on the policy of 2014 trillion dinars since the year to monetize the debt or finance the budget deficit in the issuance of cash), which was adopted during the years of the financial crisis to finance the deficit in public budgets because of shrinking cash flows of the budget.

The dinar remained on the tools of monetary policy on demand for the foreign currency represented The surplus, at the time, is pushing much of the ongoing demand for foreign currency reserves.

Although the central bank used the policy of sterilization of the dinar and control of domestic liquidity levels through the dollar window, the bank was forced to exercise tight scrutiny and its relative reserves of dollar sales decreased from the central window of the foreign currency, which led to the monetary authority facing a phenomenon of multiple exchange rates .

Ie face the phenomenon of two different rates of exchange because of addressing the suspicions of money laundering and cut any financial extension to finance terrorism after the occupation of some provinces by terrorism Da'ashi.

It has led to two exchange rates, one of which is fixed and the other is parallel to the conflict that the latter will push the dollar to rise for several months during the financial crisis.

As for the third factor, which is the most important in the cash market, which has influenced but is different and superior this time, the stability of the exchange market in its impact completely comes from the impact of the function of monetary demand on the dinar or change the structure of the behavior of thousands in demand for cash in dinars.

The effect of the rational expectations factor on the dinar holders is the rise in the real interest rate signal, in which nominal interest exceeded inflation rates (ie, the rise in the prevailing nominal interest rate to be higher than the annual inflation over the past three years).

The real interest and expectations for the transfer of the monetary demand function were structural and increased from the behavior of the monetary demand on the dinar. It should be noted that the annual inflation in the range did not increase by 1%, for nominal interest on savings deposits in banks in the organized market, The interest rate of monetary policy, which has also touched 6 percent annually, is more than one percent per year, while nominal interest in the informal money market has exceeded unprecedented levels of one percent (in the wave of so-called 180-currency traders to touch an annualized rate of money).

All these factors, including the increase in the demand for the dinar in the Kurdistan region and the liberated governorates, have contributed to the high exchange rate of the dinar in the market. The dollar has come close to the official central price in a price homogeneity that has not been seen in the country for many months. The Central Bank of Iraq to defend the stability of the exchange rate and stay constant in the continuation of the monetary behavior of individuals and their positive expectations on the strength of the Iraqi dinar, the stability of Saaralpr (reflected by the similarity between exchange rates in the two markets mentioned) may continue indefinitely.

In conclusion, in a society of monetary aggregation, there is a high rate of economic stagnation, which is politicized. Liquidity The rate of growth in monetary demand continues to outperform the real money supply growth, which can be called "liquidity trap".

The impact of higher interest rates has opened up. The liquidity trap is in line with the stagnation of demand in the real commodity markets represented by rising stocks satisfying a three-year real-time demand for durable goods.

It is worth mentioning that all these factors have been reflected and overlapped (including the rational application of banking compliance in the legitimacy of the demand for foreign currency conversion by the monetary authority on its customers) leading to a decline in the dollar exchange rate in the parallel market to close to the official central rate of disbursement in When the central bank's 51-year-old foreign reserve grew beyond the needs of the country to more than one billion and now covers nine billion dollars in monthly reserves in the expression of reserves.

3 The monetary policy of maintaining stability and maintaining evil No matter what form of success, foreign cash income.

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Advisor Abadi identifies three reasons for the decline in the dollar exchange rate against the Iraqi dinar
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The financial adviser to the Prime Minister Dr. Mazhar Mohammed Saleh, that the monetary policy of the Central Bank of Iraq aims to find a monetary framework close to the dinar exchange rate in the parallel market in a manner that moves away from the exchange rate of the official monetary policy and with a global approved difference of more than 2%, while referring to 3 Factors behind the decline in the dollar.

According to a report published by the network of Iraqi economists, and followed by the news agency N , the financial adviser to the Prime Minister, identified three reasons for the decline in the dollar exchange rate against the Iraqi dinar recently, indicating that the factors and reasons that point today to the high exchange rate of the dinar against the dollar in the market is mostly due to Three main factors.

He explained that the reasons are the ability of the central bank to meet the demand for foreign currency by the auction or the window of the bank as a monetary policy and comfortably and disciplined, especially in the flexible application of the standards of banking compliance and the second reason is the expectations of speculators optimistic value of the Iraqi dinar, which is indicated by the increasing value of proceeds of oil sales in foreign currency Which is rising and achieving surplus in the current account of the balance of payments accompanied by the government's borrowing from the central bank in dinars, which has increased its balance to 25 trillion dinars since 2014 due to the intensification of the financial crisis.

He added that the current cessation of the policy of debt monetization or financing of the budget deficit in the issuance of cash (adopted during the years of the financial crisis to finance the deficit in public budgets due to the contraction of cash flows of the budget), also contributed to the decline in the dollar exchange rate, and the central bank was forced to exercise audit procedures Which led to the monetary authority facing a phenomenon of multiple exchange rates, ie, the face of the phenomenon of two different exchange rates because of countering allegations of money laundering and cutting any financial extension to finance terrorism.

Saleh pointed out that the acquisition of two exchange rates, one official fixed and the other parallel conflicting contributed to pressure the latter towards the rise of the dollar.

The third and most important factor in the monetary market, which has influenced but is different and this time surpassed by the impact on the stability of the exchange market, comes from the impact of the function of monetary demand on the dinar or in the structure of behavior of individuals in the demand for cash in Iraqi dinar, where the rise in demand Of the effect of the rational expectations factor in the dinar holders due to the increase in the real interest rate, in which nominal interest exceeded inflation rates, which resulted from the rise in nominal nominal interest to be higher than annual inflation over the past three years.

Saleh concluded by saying that all these factors, including the increased demand for the dinar in the Kurdistan region and the restored provinces, contributed to the high exchange rate of the Iraqi dinar in the market against the dollar to converge with the official price central in a wave of price homogeneity not seen in the country for months.

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