Why you must stop the currency auction?


10/10/2016

Mohammad Tamim *
The currency auction carried out by the central banks in the countries where theeconomy is suffering from fluctuation and instability, usually occurs in countries with mono - economy side , such as reliance on a single item as if the agricultural, commercial or industrial, where this side is exposed to shake lead to loosening in theeconomic situation in the country and are affected through fiscal policy in the country ,which requires cash - the authorities of a central bank - to intervene and restore fiscal and monetary policy orientation which is known as the intervention of the central bank tobuy the local currency to keep the exchange rate. usually have it once a year or twice at the top of conditions, one of the traditional and very old ways to keep the local currency exchange rate due to the fluctuation in the exchange rate as mentioned, and we have a lot of examples of this , such as the intervention of the Central Bank ofRussia to save the ruble in January 2015 as well as the Chinese central bank intervention in June last year, for the intervention of several aspects of this, including intervention to buy the currency or raise interest rates or reduced according to the needs of the country and the vagaries of the market speculation. What regard to the Iraqi situation years ago is that the central bank sells foreign currency on a daily basis to keep the exchange rate which is a traditional way drained the reserves of the Central Bank 'sforeign currency, a method is successful does not benefit them , and the sole beneficiary of which is a group of banks and partners remittance and the private sector , which views still affect some of the decisions of the central bank to continue this policy, which has long warned us in the past. Last week , the Iraqi Central Bank announced that thereserves of foreign currency is about $ 50 billion with the SDR ( the basket), and when we come back to the state of a simple calculation is that the Iraqi currency bloc is 40 trillion Iraqi dinars , as the Central Bank of Van says this meant to be the exchange rate is Iraqi dinars 900 is equal to one dollar, but the truth is known that the 1300 Iraqi dinars today is equal to one dollar and the process is ongoing, and when checking in previous periods between domestic money supply and foreign currency ( the central bank balance) , the difference was not significant and the reason that the instruments Flyer you banks and companies are allowed to jointly auction currency which does not balance it drained a lot of foreign currency as well as traders of counterfeit bills in which we find collusion in all levels and the question is: Why over the years did things not apparent inthis image , which drained a lot of reserves of foreign currency in record time? the
answer is that the monthly oil revenues were big as it enters into Iraq is much greater than that sold a monthly amount, but now if we calculated the salaries of staff allocated to the operating budget and the amounts with what is draining days in the central bank auction , we found a much larger amounts that the intervention of foreign currency to Iraq, during the past two years exclusively Iraqi Central Bank reserves fell to more than 35 percent , and this is a serious indicator to be stopped.
so what is the solution?
solution:
1 - simply solution is to stop the currency auction and open letters of credit for merchants and companies, in the case the import of any company or dealer to any material from outside Iraq , the central bank in cooperation with other banks operating in or outside Iraq to open letters of credit launches money when entering the materials and goods into Iraq and delivered to traders or companies, but rather delivered to the point ofcontracting, this process makes it easier for the State control the entry of goods, quality and collection of fees and taxes them directly.

2 - the opening of dollar selling outlets for travelers at airports and border crossings after stamping passports and identifies each citizen an amount not to exceed $ 2,000 and will be under intense supervision.

3 - forcing foreign oil companies operating in Iraq and the mobile phone companies and other companies to pay the Iraqi government entitlements by the Iraqi dinar in contrast ,the Central Bank of the Iraqi government and other banks to open outlets for the sale ofIraqi currency in order to compel the traders and companies operating in Iraq to buy Iraqi dinar to pay off their obligations in Iraqi currency to restore confidence in Iraqi dinars and thus stabilize the exchange rate and stop wastage happening in the currency reserves It depends spending in local currency and down to the exchange rate of the equivalent of $ 1 = 1000 Iraqi dinars while retaining an amount last reserves of foreign currency to keep the value of the Iraqi Dinar.

4 - if the central bank could not application of the above he can resort to float the Iraqi currency according to the exchange rate Set a fixed stop growling as it is in theexperience of Lebanon. * deputy in the Iraqi parliament