View Full Version : Iraqi central bank governor interviewed on monetary situation

06-03-2010, 10:05 PM
Old news, but explains how the IMF is in charge of Iraq's monetary policy...guardian

Iraqi central bank governor interviewed on monetary situation

Nov 22, 2008 (BBC Monitoring via COMTEX) --

Al-Iraqiyah Television on 22 November carries a new episode of its "Special Encounter" programme in which anchorman Aziz Rahim interviews Iraqi Central Bank Governor Dr Sinan al-Shibibi.

Asked to discuss the global economic crisis and whether it has been contained, Al-Shibibi says this crisis is enormous and "will result in a relatively large recession in both advanced and developing countries." He explains that the crisis originated in the United States as a result of the real estate mortgage problem caused by easy-term loans to encourage individuals to buy real estate, and who later were unable to settle these loans. He adds that because these loans were guaranteed by insurance companies, these companies were obliged to repay the loans to the banks and, thus, some of them became bankrupt along with some investment banks. Concerning the rescue efforts, Al-Shibibi says: "The 700 billion US dollar issue is actually the beginning, because the pumping of this cash into this sector has yet to prove that it was a successful measure." He adds that "the other solution that should have been followed is moving to the real economic sectors; that is, all these sums of money should have been used to finance real issues," explaining that the bailout helped settle certain marginal issues only.

Asked whether the Iraqi economy will be affected by the global economic crisis and how great this effect will be compared to advanced and developing countries, Al-Shibibi says the effect of this crisis differs from one country to another, noting that Iraq's concern is over the drop in the demand for oil. He adds: "The sharp drop in the demand for oil has greatly impacted the revenue of these countries, but on the other hand and since oil is evaluated by the US dollar, a partial compensation has materialized," explaining that the net effect is less than what was estimated.

Asked about the relations between the Central Bank and the Iraqi government, Al-Shibibi says: "Although the Central Bank is part of the state's system and works alongside the government, it has its own independent policies," explaining that some of these policies cut across the government's course of action, but at the same time "they stabilize the exchange rate, increase reserves, and contribute to other matters that benefit Iraq and the Iraqi society in general." He also explains that the Central Bank is actually a bank for reserves, which controls foreign and local bank reserves, adding that by maintaining the stability of currency, the Central Bank helps the government "to plan its expenditures securely."

Rahim notes that some accuse the Central Bank of adopting strict policies in order to control inflation, and others justify these policies saying that these policies are dictated by the IMF, and he asks Al-Shibibi to comment.

Al-Shibibi says this matter should not be exaggerated, noting that the Iraqi Government, not the Central Bank, has an agreement with the IMF,and the Central Bank implements the government's monetary policies.

He adds that the IMF sets terms in every agreement it signs with every country, and "while negotiating with the IMF, we try to make these terms as easy as possible. At the same time, we try to impose certain matters on the IMF," explaining that these negotiations aim at reducing 80 per cent of Iraqi debts. He adds that when Iraqi debts are reduced by this percentage, the budget costs will decrease and the speculations concerning its implementation become more certain. He says: "The 80 per cent reduction in debts, which we were able to obtain from the Paris Club, is the highest percentage ever given to a middle-income country in the entire world."
Asked to explain in return for what, he says in return for policies that Iraq should implement.

Rahim also notes that the IMF asked the government to raise the price of oil derivatives and to postpone payment of the difference in salaries that was due following the recent salary increase, and he asks Al-Shibibi to explain the Central Bank's position on this. Al-Shibibi says "the IMF policies were in line with the objective to curb inflation," explaining that their outcome was for the benefit of Iraq, particularly in strengthening the purchasing power of the Iraqi dinar, which should remain under control at all times. He adds that "the Central Bank's general monetary policy is not a long-range policy; rather, it is revised every six or three months in order to monitor where things are heading." Rahim says that what is happening in Iraq today is that local banks are collecting Iraqi dinars from the market and depositing them with the Central Bank in return for a certain interest; thus, making profits at the Central Bank's expense, while they should be lending money to companies and individuals to invest in various sectors. Al-Shibibi confirms that this is the case, explaining that the Central Bank's main objective is to maintain the stability of the currency.

Asked whether the studies on inflation prepared by the Central Bank conform to the studies prepared by the Iraqi Central Apparatus for Exemption, because some believe that there is a disparity between the two, Al-Shibibi says: "The brothers in this apparatus and the Planning Ministry provide us with data on inflation; we then make our calculations to find out the rate of the core inflation on which we build our monetary policies, which aim at maintaining monitory stability," adding: "We take this data, but we design the policy." He explains that while preparing these studies, the Central Bank takes into consideration the outcome of the budget's expenditures in terms of the production attained from such expenditures.

Asked to explain whether recent salary increases approved for civil servants have caused an increase in the cost of living or inflation, Al-Shibibi says inflation should be treated by further spending from the budget," explaining that "inflation is actually a real fact, rather than a monetary issue," which means that it is caused by certain sectors that fall under the authority of the Planning and Finance Ministries. He adds that the Central Bank can only interfere when production results from budget expenditures. Asked in what way the Central Bank will interfere, Al-Shibibi says "it can interfere in the monitory policy, such as raising interest rates, holding back liquidity, or raising exchange rates. It is a firm policy in order to handle the current situation." Rahim notes that the Central Bank has reduced the interest rate to 15 per cent. Al-Shibibi confirms that it has done so, because things have improved. Asked whether this reduction took place as a result of the global economic crisis, Al-Shibibi says it is more related to the efficiency in implementing the budget by the Finance and Planning Ministries as well as the various concerned sectors. He explains that the Central Bank is against adopting strict policies, but is currently doing so until expenditures become more productive.

Asked whether the removal of three digits from the Iraqi currency is a step aimed at curbing inflation, Al-Shibibi says this issue has nothing to do with inflation, but the concerned parties are taking this issue into great consideration and giving it precedence over other issues, such as the implementation of certain monetary policies and reserve investments. He adds: "We monitor the value of the Iraqi dinar vis-A -vis the US dollar, which is relatively stronger than the dinar," noting that the digits issue is currently under serious review. Asked whether there is a timeframe for making a decision on this issue, he denies that there is, explaining that this depends on the circumstances and the exchange rate policies.

Rahim notes that the Central Bank has fixed the exchange rate for the US dollar and that it is the only party that controls any increase or decrease in this rate, and he asks Al-Shibibi to confirm this. Al-Shibibi confirms that this is true, "because managing the exchange rate mainly helps in curbing inflation. The system by which we determine the exchange rate is called 'managed float system,' which means that the price of the dinar is kept floating but is closely monitored so that it can be managed whenever a tangible change occurs." He adds that this floating system is linked to the supply and demand for the US dollar, explaining that the Central Bank is obliged to guarantee 100 per cent of the demands by Iraqi banks for the US dollar; otherwise, they might buy it from other local sources at a cheaper price, resulting in the presence of more than one price, which is against the bank's current policy. Asked whether the Central Bank has sufficient amounts of foreign currency to meet the market's demand, Al-Shibibi says that the bank is obliged to meet the demand in full, adding: "We believe that our reserves are sufficient to meet such demand." He explains that any request for foreign currencies that takes place in the currency auction is reviewed carefully before it is approved, requiring the Central Bank to always make foreign currencies available. He notes that the Central Bank receives requests for foreign currency in amounts ranging from 150 to 200 millions daily, [currency not specified], which means that it should be able to meet this demand. He explains that exchange rate fluctuation is more dangerous than any drop in the exchange rate.

link not showing article anymore:
http://www.zibb.com/article/4468689/...tary+situation (http://www.zibb.com/article/4468689/...tary+situation)

06-03-2010, 10:31 PM
Man, here we go,,,,,,,,,,get ready,,,,,,,,,,TO RV !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

06-03-2010, 10:35 PM
Thanks for the reminder Guardian, we do forget sometimes.

06-03-2010, 11:38 PM
Guardian I could kiss you......Thank you for redeaming me......to all those who had no clue on who controls the monetary policy in Iraq.....and made all these wild claims.....I friggn told you so.....but you don't listen......again one entity is in control of the monetary policy for Iraq and will be the ones who allow the rv......


06-04-2010, 12:36 AM
Med did u say IMF. iI think u said IMF once or a thousand times. Get ready here it comes.

06-04-2010, 08:41 AM
I loved it too, cuz it laid it all out, very glad to help. :D

06-04-2010, 08:59 AM
MED, As I understand, the IMF is waiting for the new government to be in place before they will move forward with revaluating the dinar. In the past, I thought this only meant seating of parliament. I think I'm wrong here. Does the IMF want a full government in place, ie, parliament seated, president and PM in place before they consider the reval or will they do it simply with parliament seated?

06-04-2010, 09:13 AM
I love this just have to finish reading it is awesome >>>>> this is exciting even know it is old news we know now that everything to this point is lined up and ready to go IMF holds the rv and cbi pulls the trigger when IMF says fire !!! thanks guardian

06-04-2010, 09:15 AM
Thanks gurardian for the post, and Med I listen and learn and knew that the IMF always had the final word!!!

06-04-2010, 09:17 AM
MED, As I understand, the IMF is waiting for the new government to be in place before they will move forward with revaluating the dinar. In the past, I thought this only meant seating of parliament. I think I'm wrong here. Does the IMF want a full government in place, ie, parliament seated, president and PM in place before they consider the reval or will they do it simply with parliament seated?

That I am not sure of....with the creation of some serious instability because of the election issues.....but talking to Groovgal about this....she is saying no that the govt does not have to be completely formed.....I just don't know.....I am planning for the worst on that....and if I am wrong....then great...

06-04-2010, 01:10 PM
Guardian GRRRREAT POST! You could not have made MED look any better had you really tried. MED has told us time and time again, but some choose not to listen. MED you the man with the plan, I am ready to Rock and Roll............GO RV!!!

06-04-2010, 01:30 PM
I love it when a plan comes together. Guardian, thanks for the confirmation. Med, your solid!!!!