The Central Bank is not prepared to trade in foreign currency
Sunday, 19 May 2013 12:51
Detection of the Director-General of the Central Bank in Kurdistan, the Iraqi Central Bank rejected a proposal regarding payment of staff salaries in dollars rather than Iraqi dinars.
And the Director-General of the Central Bank in the Kurdistan region Abdul Rahman Saleh for NNA, Iraqi Deputy had earlier proposed paying employee salaries in dollars rather than Iraqi dinars to the dollar increase in the domestic market, but the Central Bank rejected the proposal.
And the Central Bank of Iraq confirmed that Iraq has done and National Bank unwilling to trade foreign currencies. LINK
2COLLECTG: they can play this game all they want the world monetary community will make them ready!
Tripphood: Im confused, weren't they already paying in dollars?
Punisher: I believe they were.
Read More Link On Right
Tlar: Tripphood, salaries for the employees of the bank and the civil servants have been being paid in dinars. The idea behind paying them in dollars instead of dinars just came up 3 - 4 days ago.
The purpose is two fold. One, everybody was running to the nearest bank to stand in line to buy USD anyway. So this would eliminate the need to do that. Two, it was hoped that that would take some pressure off the street rate of the dinar maybe helping to bring the rates back together.
It was an excellent idea that they just shot down.
The problem IMHO is that no matter what they do, there still exists the big gorilla in the room. Iran is what's keeping these rates apart and it is apparent the bank is trying to treat the symptom and not the cause. The bank can't arrest anyone.
They have no police force and are not authorized the powers to do it even if they could. This is an executive problem who also happens to be in charge of the security forces. It is Maliki's personal responsibility and he has shown no desire to stop Iran or even call them out on it.
The bank is being accused of everything from being inefficient to out right theft including, enabling the smugglers. This IMHO is not a problem the bank can resolve without active participation and determination from the government.
Some economics experts understand what is going on and are calling a spade a spade. That's why we see articles from economists saying it is not the banks fault. Other "experts" who answer to Maliki are the ones finger pointing and blaming the bank. Maliki may view this problem as another way to consolidate his control over the bank.
This rate problem will not be resolved by flooding the country with USD. They have been doing that for months and yet there is still a reported shortage of USD. About as fast as the bank sells USD, Iran buys it and takes it home through very sophisticated channels that they have set up since 2009.
There are those on DA that I'm sure won't agree with me, but as the bank, now in its third week, again tries more new things that fail to bring the rates together, they might change their minds. Iraq has little choice but to save the dinar or face economic ruin. The CBI, with its limited tools can't do it alone.
If the government does not acknowledge and go after the Iranian blood suckers, then this currency war will continue - unless the bank does its job and takes the draconian step to knock Iran out of the saddle once and for all. A non counterfeit able currency IMHO, will soon become the option of last resort.
If I were Turki, I would rather be blamed by Maliki and his goons for having saved the monetary system which is Turki's main responsibility, rather than be blamed for watching it go to ruin while doing nothing to stop it. In some ways, to me, it is a fun thing watch as the bank eliminates one option after another.
The US had to change our currency multiple times before we finally made a currency that Iran could not counterfeit. Iraq most likely will have to do the same to get rid of the leech that is sucking the life out of it.
Wn: nothing is as it seems in Ireck
Kaperoni: Tlar, i think this is a vary accurate post. We known for years that Maliki was looking the other way on Iran. That was part of the problem with Shabibi, he called him out and wanted to stop it.
Very good point FE, paying salaries in dollars would eliminate the commissions the CBI makes on dollar sales. The CBI likes that to much to give up. That is also another reason why I think the dinar will float. The CBI can profit greatly buying and selling (controlling liquidity) as it rises.
BlueyesinLevis: Tlar, you hit a home run again.. and like Eddie and Kap both say... the CBI is all about the money. They can tweak and manipulate the little crap all they want.. nothing will change until they do as Tlar said. I nominate Tlar for Governor of the CBI. lol
BlueyesinLevis: And yes.. Kap, your point is well taken.... whatever way the CBI can make the most money.. is liable to be the path they choose... and if they float does that I expect that will trump all other considerations.. I fully expect the next real move we see will be the 1000 : 1.. just like they have been telling us. I guess we are waiting for the other shoe to drop... in the political arena.... concerning Maliki being nuetered.
Kaperoni: blueyes, it for sure is a trade off. Maintain the closed financial system and profit from the currency auctions, or open up and make the dinar internationally convertable and invite investment and business to your country.
ZenMav: Well, apparently, it's settled then. The all-to-predictable course of action of the CBI will be to continue making their commission on the auctions and the disparity of the rates be damned. As long as there is USD to exchange for IQD, the CBI continues to make a commission and hedge against their exposure of IQD inside Iraq. The GOI has to approve the lower denoms, and it seems doubtful that Maliki's weak dinar policy will be changing anytime soon.
And, given that obstacle, the best the CBI can do would be to remove as much of the 3 zero notes, take 3 zeroes off the nominal value to 86 cents, and then use the USD inside Iraq to use concurrently with IQD to make change. We cannot count on Maliki to approve the lower denoms by choice, but only by coercion. Maliki will not be the game changer, the CBI will have to take the lead in this dance.