View Full Version : Bubble exchange rates and the stability of the Iraqi dinar challenge

07-13-2015, 08:13 PM
Bubble exchange rates and the stability of the Iraqi dinar challenges * d. Haider Hussain Al Tohme / center Euphrates Development and Strategic Studies
The form of the sharp deterioration experienced by the Iraqi dinar exchange rate recently a new threat
To the process of growth and financial and economic stability in the country, especially with the decline of activity
Economic and growing unemployment and poverty rates due to fiscal austerity imposed by the budget

As is the case for oil prices, it constitutes the Iraqi dinar exchange rate obsession
Chronic living for the ordinary citizen; because most of the goods available in the market at a price link
Dollar exchange rate, which means also in close link between the dollar and exchange rate levels
Inflation in the country, when rising dollar exchange rate (increase the number of dinars necessary
To buy one dollar) rise automatically prices of imported goods in the markets even more;
Because of the greed of traders on the one hand, and Thothm of future rises in the dollar exchange rate of
On the other hand.

Iraqi dinar has lost in a record period of more than 15% of its market value, while
Iraqi dinar exchange rate decreased from (1220 dinars to the dollar) to
(1420 dinars to the dollar). It can highlight the most important factors that contributed to the
Sliding Iraqi dinar exchange rate recently and as follows:

1. dominate the financial performance of monetary policy, it has emerged clearly after determining
Central bank sales of dollar ceiling at 75 million dollars a day (Article 50 of the
Budget 2015), and to assign the central bank collects the customs taxes on goods

2. deterioration of the price of crude oil in the world markets and the scarcity of his successor in the flow
Foreign exchange for the country, which has increased the expectations of speculators to re-evaluate the dinar
Iraqi in line with the decline in oil revenues.

3. The financial and administrative corruption, which included an auction sale of foreign currency because of years ago
Weak oversight and the dominance of political wills to enter the auction, as well as the existence of suspicions of corruption
Multiple in the work of the private banks involved in currency auction, and the involvement of a large number of them
Dollar smuggled abroad, and the lack of deterrent and decisive laws that limit.

4. twice the independence of the Central Bank and restrict his freedom in formulating monetary policy and choose
Appropriate monetary instruments to achieve the financial and monetary stability, and try to power
Government swallow monetary institution as an independent body.

5. collapse of the productive apparatus of the country and the loss of the ability to produce the most basic goods and transformation
Iraq's economy to a large market for industrial and agricultural goods imported, which increased
The demand for foreign currency to pay off the uncontrolled import bill.

6. deterioration of the security situation and the increasing acts of violence in the country with the control of the organization "Daash" on
Several Iraqi cities, making pessimistic forecasts, especially from the presence of the owners of capital
Huge in the country on the one hand and foreign investors on the other hand, and this is what made the direction
Outward movement of the dollar down.

7. At the political level, the political climate of sectarian and cramping the class did not support
Political minimum of economic and monetary stability in the country; because of expectations
The continuing collapse of the political process or a political coup ousts government
And its institutions.

8. political quota system, which extolled the political scene in Iraq cast a shadow over
Economic landscape, through the removal of experienced and competent of all ministries
Economic and financial institutions for the benefit of a layer of politicians eager for money
And power, increasing the deviation and the deterioration of the work of these institutions in the performance of their duties.

In order to achieve stability in the Iraqi dinar exchange rate, the government should make
Greater flexibility with central bank decisions and try to decode the correlation between tasks
Central Bank and other institutions (such as the Ministry of Finance).

On the other hand, should the Iraqi Central Bank on the development of new monetary instruments, is
Currency auction, to stabilize the exchange rate of the dinar to the sale of Iraqi oil
Iraqi Dinars exclusively. And tighten sanctions on the financial and banking authorities frivolous
The stability of the dinar exchange rate by promoting rumors and smuggling of currency and acquisitions
Dollar to achieve economic and political goals.