Ellie: Sunday, 02 June / June 2013 BAGHDAD / Walid al-Mahdi
With the continuing decline in the exchange rate of the dinar against the dollar and the central bank sales since the change of Directors of the Bank, said sources familiar with the Central Bank of Iraq will begin next month to open letters of credit in the banks to re-dollar exchange rate against the dinar to normal and prevent a repeat of volatility the exchange rate.
Said an economist close to the bank "that the administration of the Central Bank decided to start the application of measures to curb rising dollar against the dinar most important opening letters of credit in the government and private banks,"
noting that the bank refuses now to disclose details of some of the procedures being will be confidential for fear of exploitation of some beneficiaries of the auction currency.
Read More Link On Right
The expert added that the central bank hopes to make the exchange rate under (120) dinars through the new procedures, which will begin next month.
And plunged the value of the Iraqi dinar gradually over the past weeks to reach the price per dollar to about 1290 dinars after it had been stable on 1210, the highest rate up to the exchange rate during the past two years.
For his part, MP Haitham al-Jubouri said the CBI told the Parliamentary Finance Committee that will begin next month, the application of new measures to curb the rise of the dollar against the Iraqi dinar.
Jubouri said that the parliamentary Finance Committee has informed the Iraqi Central Bank support for all procedures in reducing the rise in the dollar against the Iraqi dinar.
The parliamentary Finance Committee this month and central bank governor Abdul Basit Turki agency and discussed with him the reasons for the high price of the dollar against the Iraqi dinar without to announce the details of what has been reached in this regard. LINK
Punisher: Well it is todays news so great ;)
Sparky: Do you suppose that 120 is a typo? Should be 1120?
Kaperoni: sparky, 120 is the difference from the bank rate to the black market rate (1170 to 1290=120 dinars). In other words, the CBI hopes to drop the black market rate under 120 dinars by these new measures so citizens are not forced to pay 1290 for dinar.
The CBI rate is still 1166. An acceptable rate would be around 1220. This problem has nothing to do with what we want...which is raising the value of the dinar.
Though we hope they raise the value soon.
Tlar: Great plan but will have little effect. By opening letters of credit for companies and the government, the CBI is attempting to control the actual transfer of funds out of Iraq. The LOC basically is an IOU and must be presented to the bank for payment.
If the government or a company buys something from another country, the bank issues a letter of credit. Once the goods are delivered and signed off on the bank makes payment.
Yes this is a good Idea but it still won't solve the problem. There is no transparency to the bank of the billions of dollars being smuggled to Iran, Syria and now most likely Hezbollah.
These dollars are not exposed to the way normal business is conducted. By their shear nature, these funds are smuggled illegally and would never show up on a letter of credit.
The LOC will insure through the accounting and transparency controls, that goods ordered were actually shipped and received in the quantities ordered, and in good condition. This will eliminate some of the normal theft but does not deal with the smuggling of USD which is at the heart of the problem.
USD is purchased from the street and collected in secret either by Iranian phony companies, or boldly as it was by the Lebanese bank that shipped the 7 billion to Hezbollah over a three week period.
The fact that this transaction was discovered and brought to light, I can assure you it won't happen that way again. I say boldly because that was a bold move by a bank in Iraq.
Most currency is smuggled at night in trucks or planes. It won't show up anywhere or be reported to the CBI. The only thing the CBI knows is that the auctions are selling records amounts of USD without any saturation point in site.
In fact to use their words, "there exists still a deficiency in USD on the streets of Iraq." So IMHO, although this probably is a good thing to get the government using LOC's, it won't solve the problem.
I hope his plan includes more than just LOC's. That's an above board solution to an under the table problem.
ZenMav: This is the start of the pragmatic approach to remedy the problem with solutions that [the ubiquitous] they already know are doomed, insufficient. There will be a "failure" to correct the problem without taking drastic measures. We will see political theatre at its finest over the next 4-5 weeks.
BNA13: Look like more smoke and mirrors from the current CBI administration.
The Central Bank decided to allow banks to open documentary credits
The Central Bank supports the orientation of private banks with external opening documentary credits
DarbSalad: tlar, ZenMav or BNA13: Why is the CBI unwilling to move from a closed currency to a open policy currency? I would think that our Central Bank and the IMF should demand this action.
It appears that the young ISX is struggling and direly needs the adoption of an open currency policy. The average Iraqi citizen and aspiring entrepreneurs are the casualties of this policy.
Initiating this policy change should force a sense of urgency to enact the important investment and banking laws. It appears that parliament will never lead.
BlueyesinLevis: I believe Maliki's Finance Committe is in charge of the release of the LD's... so the CBI could lift the foreign exchange rate.. but everything could collapse if done wrong and there is not coordination between laws, LD's release, and the rate change.
The problem is... Jabouri. Maliki's goon lawyer / cousin on the Finance Commitee... the Law of Indebtedness may or may not be ready... there are just so many little things that would be tied together nicely in any other country on earth.. and COULD happen in Iraq...
IF Maliki was not an agent of Iran hell bent on stopping change and progress.
That is just the way I understand it.....
DarbSalad: I presume that the CBI could release the existing lower denominations with the two languages. I have my doubts that the GOI will complete its work unless the CBI forces them into action. The creation of a conducive environment for economic growth is not at the top of parliament's list.
ZenMav: Darb, pretty much everything BlueEyes said is how I see it. There's also the matter of the dinar Syria and Iran still possess. They had trillions a few years after Maliki took office and gave Iran favored nation trading status, started trading with his buddy Asad in Syria, too. That dinar needs to be repatriated, as much of it as possible.
OK, I'm back. I was in the library.
Punisher: Once the C.B.I. acts (or I should say IF they act at all) then the other things will fall into place or be forced to fall into place. Something never done before is needed to make things right again.
BlueyesinLevis: Darb.. i think the Finanace Committe pulls the strings on the release of a new currency / lower denominations. The CBI can do anything they want to with the rate...Shabib was reparing to float it last fall... but the CBI does not have the authority to change the currency... deal is.. the CBI does NOT want to screw it all up.... they would prefer to work WITH a friendly Parliament... and that my friend.. is the big problem.. Maliki and his goons are FAR from friendly.
Zul: I agree with Tlar. LOC will have little impack on street rate. It is the daily price on the street that is causing volatility,
BlueyesinLevis: Oh.. wait. I see you said the original printed LD's with the 2 languages... I gotcha. My bad on how I read your post. Maybe you are right there... that is a very good point. I'm all for it. if that is the case. Do it now.. in time for the July 1 tariffs. Damn the Torpedos.. straight ahead.
Like Enorste said all along.. the Law of Indebtedness is simple... whatever it is worth in USD before.. it is worth in USD now.
Punisher: Can someone hypothetically answer this question. What happens if the C.B.I. with their new plan still cannot bring the rates back together and they do NOT do Tlar's nuclear option (raise the value of the currency)? Where on gods green earth would we be then in this investment? I am not 100% convinced that many of the powers that be have common sense to see how to stop all of this is right there in front of them.
DarbSalad: Blue,I do not want to get off the topic. There have been a few articles stating the distribution of oil stipends to the Iraqi citizens this month.
Phoenix stated that the stipends would backdate to 2010. Plus, some of the government workers are scheduled to be compensated this month.
These employees have gone over a year without compensation. How do they plan to fulfill this large distribution? Possibly through the cards?
We must take any statement or proclamation from the Iraqi Government with a grain of salt. Their track record is not the most reliable. Good to hear from you.
DarbSalad: ZenMav, I agree with your comments on repatriating as much dinar as possible. I wonder if Nouri is consuming some of that wholesome food that Iran is gracious sending to his people????
ZenMav : BlueyesinLevis, Don't look for the Law of Indebtedness beforehand. It is handled per force after the RV/ff.
Punisher: Darbsalad, good point. I really want to see how they are going to pay people this month.
There have been a few articles stating the distribution of oil stipends to the Iraqi citizens this month. Phoenix stated that the stipends would backdate to 2010. Plus, some of the government workers are scheduled to be compensated this month.
BlueyesinLevis: ZenMav , Right you are, Matey. I dont think we are gonna see much of anything in front of a big change. I like the window we are in... but it is tough waiting it out... wondering what they heck they are up to.
Punisher: So much they can do this month. And so much they can also "drop the ball" so to speak.
Kaperoni: I already posted on the oil distribution to citizens. Unless they have some secret fund they have been hiding money, Iraq does not have the funds to give to the people which we calculated out to about 30 billion if I am not mistaken. They don't have that kind of money extra to just give away.
In fact, if they did, it would scare me that they would spend it when it could go to back the currencies value. Enorrste stated on the CC, that they don't have the money, and Kirk Sowell also concured.
So it won't happen. A RV unless it's substancial won't solve it. So more than likely, it will be pushed off just like all the other promises broken.
Tlar: kaperoni Check Maliki's Swiss account. Maybe he would be willing to make Iraq a personal loan.
Punisher: Kap, that means the Mastercards will probably also be pushed back.
Bigbadassdog: You know I sit back and read all your posts and the last couple of weeks it just gets gloomier and gloomier. C'mon use your heads. Do you actually think Iraq is going to fail?
That all the money the US and other countries put into Iraq and lives lost will just go by the wayside? That Maliki is going to assist Syria and Iran forever and of course we will just sit there and do nothing?
Lewis: Big-dog, I always think in time we in this investment will come out on top. But as you well know, we wanted it to have happened yesterday. I do think time is on our side; however, waiting is the hardest thing to do.
Punisher: The C.B.I. cannot fight the average joe showing up every day to exchange dinar for dollar only to give it to Iran. That seems like an uphill battle...
Tlar: bigbadassdog, I think we all agree at some point this country will be great and will be very rich. The doom and gloom is only a function of how long before Iraq becomes great which is wholly dependent IMO on whether the steps being taken today advance or retreat from the ultimate goal of our investment. The length of time to achieve the end game of our investment is at stake.
The more bad decisions and directions the country takes, the longer it will be before we see our investment pay off IMO. We have been watching over the last month and in fact an argument could be made for much longer, that Iraq is moving 2 steps backward, one step forward.
If Iraq were to do the right things starting today, it would be two steps forward one step back. That would be exciting to say the least because we would be moving in the right direction to our end goal.
I personally don't care as much about Iraq as I do the money I've invested in this. Maliki is a big obstacle that for the present threatens to eliminate an early satisfactory conclusion to this investment.
IMHO this investment is not just in a holding pattern, but every day there is reason to believe we are going back words at an accelerated rate. The war in the Middle East is getting ready to get nasty.
Assad fighting the rebels with new weapons from Russia, Hezbollah attacking rebel held towns from Lebanon, and Maliki attacking rebel held towns from Iraq with Iran right in the middle, supplying men and material and coordinating the pieces to this puzzle. People don't go to war to loose.
The rebels run the risk of being slaughtered without assistance and those in sympathy with the rebels risk becoming directly involved. This is a war that has great potential to expand in the Middle East as connecting borders like Iraq borders begin to be hazy.
If Maliki continues in assisting Iran and Syria, it will definitely drag our investment out. Iraq will be blowing its wealth in this commitment and IMHO our investment will suffer the consequences of a declining Iraqi economy. "All for the want of a nail" I hope I'm wrong.
Kaperoni: I am a believer and no way doom and gloom. Im just a realist and you cannot put the cart (dinar) before the horse (banking system) in this investment. Iraq needs to get all the ground work done, then we hopefully will see some positive results.
Tlar: Just so everybody understands where I am, I am high on this investment to.
Iraq will get there but unless the bank takes a dramatic move, it will be a while yet.
With a good government that is for the people instead of one with a cyclopean view based on personal aspirations, IMO we would already be there. Unfortunately we have to play the cards were dealt. I am of the opinion that anything could change on the drop of a hat so I'm always hopeful.