BAGHDAD (Reuters) - Talks with the United States on additional exemptions from Iran's sanctions

Economy News Baghdad

Newspaper «New Arab» conducted a dialogue with the Governor of the Central Bank of Iraq, Ali Alalak, and his follow-up "economy News." In which he talked about the difficult monetary and financial stage passed on his country, with the tense security situation and the decline of oil revenues, as well as the repercussions of sanctions on Iran.

To the text of the dialogue:

What has the Iraqi Central Bank achieved after the stability of the security situation in the country during the recent period?

We have passed an important and dangerous stage at the security and financial level in previous years, and the central bank has accompanied the difficult stage in fighting of another kind, represented by trying to maintain economic, financial and monetary stability.

The legacy of the past years of destruction, destruction and decline in services and infrastructure has led us to think about strengthening the development orientation of our work. Of course, the Central Bank of Iraq has a role in this matter, considering that the banking sector can mobilize the resources necessary to develop the development process, in addition to the initiatives carried out by the Central.

From here we launched financing initiatives amounting to $ 6 billion in the industrial, agricultural and housing sectors, which are perhaps the largest in the history of Iraq.

I mentioned earlier that during the fall in oil prices oil revenues fell 70%, what did the Central Bank in the light of this crisis?

There was a big challenge and a difficult situation, and the Ministry of Finance announced in early 2016 its inability to pay the salaries of employees. Here, we immediately announced that things can be arranged, fearing the collapse of the general situation.

The central bank law allows him to buy treasury funds (a borrowing instrument) belonging to the government, and both the Rafidain and Rashid banks have joined them, so it became indirect financing, and of course there were no options.

In addition, Iraq received some funding from the Bank and the International Monetary Fund, but the amounts were small relative to those provided by the Central Bank, we have put a high interest on remittances equivalent to those in force in the market, so that the Ministry of Finance is keen to pay, We released a portion of the reserves of banks to buy treasury transfers, and these amounts amounted to about 20 trillion dinars within two years, or about 18 billion dollars.

We see the stability of inflation at 2%, while in Iraq there is a decline in purchasing power and a rise in the rates of poverty and unemployment, how to explain this paradox?

On the one hand, there is government spending, which is mostly consumption, so there is a recovery in the commercial sector, but this activity does not generate jobs. In contrast, the productive sector is still lagging behind in this framework, while it is the job-generating field.

Therefore marginal activities are still dominant, leaving large numbers of unemployed, especially among graduates who do not find jobs suited to their specialties. There is also a weakness in investments and projects, which accumulates unemployment rates, so the central bank as the closest sensor to the economy is trying to stimulate productive sectors.

Is the independence of the central bank in any country essential to be able to control the economic indicators, to what extent this condition is available in Iraq? Are we critical of the impact of negative fiscal policies on the monetary sector, while the Central Bank is a financial adviser to the government?

The truth is that there is no direct impact or intervention, but there are indirect effects, and lead to significant implications for monetary policy. In terms of financial policy subject to security and political conditions and changes more than subject to the standards of fiscal discipline that are consistent with monetary policies.

Even the Ministry of Finance, although it takes a lot of pressure into consideration, but the budget prepared by subject again to the political review in the House of Representatives (Parliament) and many of its items, so the nature of expenditure and income and deficit and type of monetary policy.

What about the high levels of corruption linked to the coverage of the central bank funding gaps left behind?

Corruption affects everything, including the economy, investment, the work environment and others. The central bank, which works better when economic and investment performance is sound, is affected. When the administrative and institutional system is effective, it eases pressure on the central bank and makes resource mobilization and movement transparent, clear and geared towards the right goals. Therefore, corruption is certainly a source of threat and impact on the overall economic situation, and therefore on the central bank, which aims to achieve economic stability.





How does the central bank deal with expanding US sanctions on Iran, especially as there are deals that need payments in dollars, specifically in terms of gas and electricity?

As for the central bank, it has a situation of adjustment to the sanctions. The dollar deal with Iran has been suspended since 2012. In practice, such transfers can not be made, since any payments in this currency will continue in the US financial system and will stop. Therefore, Iraq used to pay in currencies Other.

With the expansion of the embargo and the reservations of States, options have become limited even in settling payments in currencies other than the dollar. At the same time, there are essentialities linking Iraq with Iran, including gas and electricity.

Currently, there is an understanding with the US side to try to sort it out or get some exceptions. The talks have gone a long way and this issue may be resolved soon, probably within days.

How does Iraq approach the AML / CFT standards?

This issue is new to Iraq, as a new phenomenon and as a procedure. There have been no private entities involved in this area in the past. Since we assumed the task of managing the Central Bank, we have given great attention to this issue, through the formation of an independent department to combat money laundering and the financing of terrorism and supported by the necessary administrative, financial and even independent capacities.

At the same time, we have been working on a new law, with about 70% of the gaps in this area due to the lack of legislation. Therefore, we focused on this issue and issued the law in 2015, and prepared according to the best international standards in partnership with the relevant international organizations on this file.

Following this law, several measures have been taken in terms of issuing regulations and regulatory and regulatory rules, since this file concerns many sectors. When we started in the gray zone and during this year we came out of the last phase, the continuous follow-up phase, and we are like other countries in the application of international standards.

Is the Central Bank able to control the banks operating in all of Iraq, in terms of money laundering and terrorist financing? Do the banks really adhere to the generalizations of "Central"?

The CBI has strict control over banks and strict application of the principle of "Know Your Customer". Frankly there is great progress in implementation, because the central bank's procedures are strong and strict, and we have office and field control.

On the other hand, this issue is of international concern, and if the bank fails to comply with the criteria, it will therefore fail to deal with its external transactions. Today any bank that does not have foreign transactions will become a local shop.

Therefore, there is a commitment by banks and cooperation in providing technical support, capacity building, training and others. There are also tests for workers in these sectors, in conjunction with the establishment of anti-money-laundering units in each bank and compliance units.

We note that there is a problem of confidence in the Iraqi banks by the citizens, coupled with the failure of Mali to take over a number of banks in the past years, does the Central Bank intervene to impose an increase in the capital of banks on the one hand, and compensate the depositors on the other hand?

When we take the number of troubled banks to the total banks operating in Iraq, the ratio becomes normal. There are fewer than 5 banks now out of 70 working banks.

Banks face challenges with existing general conditions, and on the other hand there are many problems associated with citizens' commitment to banks. When there are circumstances associated with security, political and other disintegration, there is an excess of law and a lack of commitment to pay. Most banks are new and when there are many borrowers who do not pay their installments, there is a default. There are more than 6 trillion dinars ($ 5 billion) of non-performing loans, out of 37 trillion dinars.

During the financial crisis experienced by Iraq, we had alarming indicators linked to about 10 banks, and we entered the line and put some procedures and amendments and we were able to address a number of problems and left only 3 to 4 banks need some treatments.

Was there a cash subsidy for troubled banks, or was it used for the reserve set by banks at the Central Bank to compensate the depositors?

So far we have not offered any direct monetary support, but we have paid for actions within troubled banks, and we have pressed to reduce some expenses or liquidate some assets from real estate and others, so far there has been no bankruptcy in the sector, and we avoid this move. Most of the depositors are new and "boasted" in recent years, and we do not want to hurt them.

For example, there was a bank that was the worst among troubled banks, Dar es Salaam. We applied the idea of ​​a "bank bank", a bank directly to the Central Bank of Iraq, which is operated for two to three years, enabling it to become ready for sale. Within this project, we turned the depositors into shareholders in the bank, which keeps their money.




http://economy-news.net/content.php?id=14720

MilitiaMan and KTFA Members Late Saturday Night 12-15-18

12/15/2018
 
KTFA:

MilitiaMan:  The Alak interview has told us that they are at a 6/1 (16.5%)  good to bad ratio with loans. If you have read that recent interview with him, he tells us that they have loans of 37 Billion Dinar of good and 6 billion Dinars worth ($5,000,000.00 USD) of bad. It is not a bad ratio for what they have been through to date.

My point is that the value of the 6 bln Dinars is key that Alak points it out, imo. Why? Well it gives a value of that 6 bln. Alak cannot openly come out and tell us a rate or a date literally to the tee.. But, he can in my opinion indirectly point us to it with forward guidance. 

If we look at the value he places on the 6 billion dinar you get $.83 per unit or dinar in dollar terms. 6 bln IQD = 5 mln USD or $.83 per USD. So then that means 37 Billion Dinars equates to $30,710,000.00 USD. 

Now remember that he can't tell you yet, that the zeros are dropped, as they haven't as far as I can tell, yet. But, we expect them to when the time is right as he clearly taught us through articles.

The 6 billion dinars becomes 6 million once they delete three zeros off the exchange rate and thus 37 billion dinars becomes 37 million by definition.
....



​So by applying the value they gave us and dropping 3 zeros off they exchange rate we get a 6/1 ratio on loans and the value of them. There are two separate issues there. Good and bad loans and the value of the bad loans which when broken down tells us a relationship to the USD per Alaks words not mine..

Just as they do with the AMF / AAD by the value of their loans. The AMF doesn't actively publish imo a rate, but, they show us the loan amounts and approximate value of them in articles based on relationships with the USD.

There is a recent one in regard to Tunisia and the AAD through the AMF.. We have to find the loans and use them to do the math to get an idea of what the AAD exchange rate is. We have learned that the AAD will have a relationship with the IQD.

So Alak, imo is telling those that need to know (Regional Trading Partners) that would need warning as to what he is doing and where they stand in an indirect way. That imo is forward guidance used by Central Bankers..

So the recent data imo fits this model and may be spot on what we can expect into the future. imo..  So from the Interview he again noted 37 Billion Dinars good and 6 Billion Dinars Bad. He noted the value of the bad were valued at $5,000,000 USD 

So if Alak does mean loans (contracts, which will have to be adjusted.) and he deletes the zeros to get things on a level playing field we need to make apples apples. So drop three zeros off 6 billion dinars you have 6 million dinar loan worth $5,000,000 or $.83 per unit.

Making apples apples to get the value of the 37 billion Dinars drop three zeros and you get 37 million Dinars. 37 million Dinars x $.83 you get $30,710,000. So 30,710,000.00USD / (divided) $5,000,000.00 USD = $x.xx  per unit USD in loans and i and a relationship to the value of those loans in us currency, imo..

We shall see one day soon imo if this holds true or not. If not, they sure show good reason for that it is on their mind. For an acting Central Bank Governor to talk in terms of that of the above in an interview, is powerful imo.. Back that up with the article WS posted and follow up with Articles posted by Delta..
 
So as noted below WS brought us: 100/120= $.83. Go back to Alak above talking about loans. 6/5= $.83. Do the math and then see if you smile? imo.. Lets see if this data has legs.. We shall see imo.. ~ MM

December 12, 2018