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BatmaninIraq
07-14-2016, 10:53 PM
July 14, 2016

Iraq and IMF: First and Second Reviews of the Staff-Monitored Program and Request for a Three-year Stand-By Arrangement-Press Release
http://www.imf.org/external/pubs/ft/scr/2016/cr16225.pdf

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10.
The stability of the exchange rate provides a key nominal anchor to the economy in an uncertain environment. The authorities are therefore committed to maintaining the peg to the U.S. dollar despite the deteriorating external position. The government will gradually remove remaining exchange restrictions and multiple currency practice with a view to eliminating exchange rate distortions. In this connection, the authorities will remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction. Moreover, the CBI will increase the sale of foreign exchange for valid current exchange transactions on the official market in order to reduce the spread between the official and parallel exchange rates.

13. The government is committed to maintaining the peg with the U.S. dollar. The peg provides a key nominal anchor in a highly uncertain environment with policy capacity weakened by the conflict with ISIS. The CBI will increase the sale of foreign exchange for valid current exchange transactions on the official market in order to reduce the spread between the official and parallel exchange rates.

14. The government will gradually remove remaining exchange restrictions and multiple currency practice (MCP) with a view to eliminating exchange rate distortions. Such a move towards acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement will send a positive signal to the investment community that Iraq is committed to maintain an exchange system that is free of restrictions and MCPs for current international transactions and thus facilitate creation of a favorable business climate. As a first step, the Council of Ministers will approve and introduce to parliament an amendment of the Investment Law, or the CBI will issue clarifying implementing regulations, to remove the limitation on transfer of investment proceeds that gives rise to an exchange restriction (SB Table 5), as recommended by a recent technical assistance mission of the IMF. As a second step, the CBI will, by the end of 2016, make the weekly limits on the purchase of cash at the weekly foreign currency auctions indicative, in the sense that any bank requiring additional cash for their clients’ legitimate travel expenses will be able to obtain the required amount above these limits on the basis of appropriate documentation. The CBI will make the public aware of such a policy by explaining it through a press conference and on its external website.