Editorial: CBI reserves and surplus State budget and coordination required

Dr. Abbas Fadel Mehdi

Iraqi economists network

Whirlwind media have raised attempting to enter the Prime Minister’s Office in details the work and functions of the Central Bank to increase speculation on dinar.

And which contributed to heightened speculation is scientifically unjustified remarks and one economist close to statistically Prime Minister about the need for foreign exchange reserves deductible, regardless of whether or not the possibilities of constitutional, legal and economic angles. Such statements are considered in content, timing and outgoing references close to encourage speculators to bet on the deterioration of the exchange rate and lead them to more speculation, and this regardless of the role of States bordering Iraq to sell dinar to buy the dollar within the Iraqi market.

That a Central Bank to his current professional financial stability policy for Iraq by reducing essential for external debt saddled the Iraqi economy in the deposed regime, which the Central Bank has been able, through coordination with the Ministry of finance, external debt reduction to Iraq from about 220% in 2006 to what is estimated at about 37% only 2011 is one of the great achievements that monetary policy through professional management in the Central Bank. The success of the policy of the Bank in currency stability through the stabilization of the exchange rate and maintain the transparent management of foreign currency reserve and sent confidence in cash position and achieve an acceptable degree of economic stability after years of hyperinflation which crush capacity purchasing power of Iraqis in previous years did not conform and attempts and tireless weaken the role of Central Bank monetary policy. And animate as practised in economies economic nearly 20 countries under my previous international advisers in United Nations development planning that such attitudes aimed at weakening the role of the Central Bank to become catalysts for our national currency speculators to buy dollars and sell dinar, and is the opposite of what we want our esteemed Prime Minister at this critical stage.

Secondly, it must be noted here within this context that the reserve estimates as Iraqi IMF report issued in March 2011 were not exceeding 7.5 months of imports of goods and services 2011. And expectations of the report of the International Monetary Fund reserve ratio down to the number of months of import to 6.9 month in 2012. ………. I thank fellow Iraqi economists network Dr. Walid khaddouri and Dr. Ali Mirza for their remarks on the origin of this paper value sent to colleagues in the network of economists Iraqis on 14 April 2012. IMF – Second Review Under the Stand-By Arrangement, Request for Waiver of Applicability, Extension of the Arrangement, and Rephasing of Access, March 4, 2011, Table 10, p.25

The same source above, Table 7, p.22 ……..

Despite the prospect of high volume up more than the expectations of the International Monetary Fund in its report referred, but such figures do not indicate the magnitude of the reserve in comparison with the size of the economy depends on oil import mainly for hard currency, it is potential cyclical economy threatened by decreases in oil prices as well as problems and threats to close the Strait of Hormuz if things are more strained between neighboring Iran and the United States. Brent prices have fallen over the past few weeks from approximately 128 dollars per barrel to about $ 120,000, which requires caution, it can lead to worsening of the financial and economic crisis the euro zone expectations for international speculators bearish oil markets could lead to noticeable decline other prices on the international level. As is known, the hard currency Iraq outcome is a function of export prices and quantities, and therefore the budgets of the State and the stability of the Iraqi dinar will require a prudent balance between economic policy imperatives of expansion in investment spending and stimulate production and demand for productive employment and maintaining price stability (dinar).

It must be noted here that the frequent allusions to the large reserve to Iraq ill-conceived references from some economists to quantify as Hafidh wrote nearly two months ago in his Institute magazine “dialogue” and entitled “what about backup ”? In addition to Mr. Abdul Hussein Al-Anbuge article a few days ago on the subject has become the political arm impact on trends in the country’s Central Bank to weaken the role of the Iraqi economy requires higher reserve ratio to imports to 15 months as a minimum.

Thirdly, the colleague Dr. Ali Mirza in written intervention within the Iraqi economists network to higher probability of a “genuine surplus accrued” to the Ministry of finance as a result of not spending allocated prior years even though budgets had planned deficit. This actual state budget surplus (no programmer) was known and anticipated at this stage where oil revenues and prices much higher than assumed by the financial budget for 2011 has already Dr Hussain Shahristani and referred in a statement to the marked increase in oil prices over the past year, the Iraqi source. There is no doubt that the history of fluctuations in world oil prices should become a catalyst for caution, what may be a fiscal deficit in the year or another year of surplus may turn to reverse. Thus, a surplus of Mali actual 2011 budget (not projected), webaghalb event also accumulated a surplus of Mali from previous years ‘ budgets should limit calls from some ill-advised use of Central Bank reserves, but we demand of national economy Affairs officials to improve the management and professional and efficient public sector spending and investment and solve basic constraints that bound breakthrough industrial and agricultural activities with significant impact on the operation of the unemployed. It must be noted here, that the Bank’s success ……… Have agreed with me on this for Dr. Ali Mirza when our cured for this command. In a television debate a few days before Iraqi channel, one of the gentlemen of Deputies was excited to invest European real estate reserve owing to higher dividends over the past 20 years, which reflect a lack of knowledge of the backup job. The Central Bank reserves primary function is to maintain exchange rate stability and financing imports when financial crises, which require investment of up to tovirakber degree of liquidity of the economy in crisis, solutions and this should be left to the Central Bank and specialized departments as a result of long experience in this area. ………

Inflation reduction Central as measured by the index of consumer prices from 27% in 2004 to around 5.5% in 2011 and the relative stability of the dinar are the few successes for economic policy in Iraq after 2003, which were mostly inclined to many flop due to poor financial management agencies, planning and follow-up of implementation of programmes and lack of professional capacity required.

Therefore, if there is a significant surplus in the General State budget, actual, and the Central Bank of the leading legal and constitutional background to achieve an acceptable degree of price stability (dinar), we need to ask here:

(1) does the influential advisers advised gentlemen Mr. Prime scientifically substantiated advice about the necessity and possibility of figures and the results of the use of this reserve, particularly in the light of the cumulative surplus in the General State budget and approved by the House?

(2) whether these admonitions, a weak scientific and statistical evidence, for the benefit of the national economy and to Mr. Prime or creator of the institutional and economic problems without objective justification?!

(3) to Iraqi dinar exchange rate has fallen against the dollar after the crisis emerged to the surface and prompted speculators to buy the dollar?

(4) only cost the earthquake brought about by such interventions which hit the dinar by rise in the prices of imported foodstuffs has especially if the continued climate of instability about money monetary policy in the country and the Government’s intention to dispose of this reserve, which showed these enticements and articles some advisers limited experience with the market economy and its interactions?

(5) hwalhagm optimization for backup so that the Monetary Authority to maintain the exchange rate of the dinar, degradation and remembered as Iraqis were still alive when the excesses of the financial authorities to reserve and print criticism without objective criteria to the collapse of the exchange rate to about 3,000 dinars dinar?

(6) you forgot to use the ‘ gentlemen on reserve by the Government — despite a surplus in its budget of last year — involving such policies under the former regime on society of inflation spiral crush Central and poor classes incomes? You forgot the high index of consumer prices (b 235% p.a. on prices ………… Figure calculated from the data consumer price indexes as published by the CSO website. See https://www.cosit.gov.iq

Same ibid ………….. Fixed to 1993) from 6.3 in 1990 to 2672.9 in 1995 when state money were printed without controls and Mall of Hussein Kamel (ignorance in Economic Affairs) create a bridge in Baghdad floors “with 2 tons of paper” what is common and rolling?

(7) these gentlemen forgot amid enthusiasm “bullish” to justify the use of reserve scourges, which towed it government monetary policy interventions and the resulting high price index for foodstuffs from 5.1 in 1990 to 3167.4 in 1995 (in constant prices of 1993), i.e. that all citizens food prices doubled during half time 621 decade devastating time?

(8) and last but not least, if the honorable gentlemen seek “greater coordination between monetary policy and other correctly and look for careless disposal of Iraqi currency reserve, Vallès them best start first (the same enthusiasm) the revitalization of the work of the private sector and investments and operating it? Not worth a sector of agriculture, industry and develop the same foot moral (which attempted to they show him finally) when you stand before the interests of “lobby” which contributed to disable tariff act after its release last year? Alice directing concerns about accelerated tariff activation code for better precision on the Iraqi economy resources that havdat exchange rate from acute deterioration? Wouldn’t it be tariff activation code provided for protection for manufacturers of Iraq and its farmers and stimulating productive activity, which will create many opportunities of productive jobs for the unemployed? Wouldn’t it be running expanding industry and agriculture as a result of the required protection of the most important tools for combating poverty and achieving social and political stability in Iraq?

Therefore, this calls for monetary policy attenuation and weaken its credibility, an ancient Foundation and high transparency through the confidence gained in the home as well as dealers dealers and international institutions abroad, leading to one of the few successes in comparison with the rest of the Iraqi economic management? Do it all to seize the country’s cash reserve capabilities which will attenuate the economic stability and deterioration in the confidence of internal and external monetary and financial reputation Iraq? Are all acceptable, SIRS, cram, and in the possession of the Ministry of finance will appoint a Cabinet surpluses accumulated in the current deficit (diagram not actual) in 2012 and possibly both or part of future deficits?!! ………….

Alternate Translation: In central bank reserves and budget surplus in the state and the desired format Date: Thursday, 26.04.2012 0:21

D. Fadel Abbas Mehdi

Network of Iraqi economists

Has led the media storm sparked by an attempt intervention Office of the Prime Minister in the details of work and functions of the central bank to increase speculation on the exchange rate of the dinar. It contributed to the increase that speculation is unwarranted statements scientifically and statistically one of the economists close to the Prime Minister on the need for truncation of foreign currency reserves, regardless of the potential or lack of angles constitutional, legal and economic. Such ill-considered statements in their content and timing of the close of the references are encouraged speculators to bet on the deterioration of the exchange rate and push them to further speculation, and this regardless of the role of countries neighboring Iraq in the sale of the dinar to buy dollars in the Iraqi market.

The link between the central bank under his leadership the current professional policy to achieve the financial stability of Iraq and to cut a key of the foreign debt that handcuffed the Iraqi economy in the period of the former regime, which managed the Central Bank, through its coordination with the Ministry of Finance, reducing the ratio of external debt of Iraq of about 220% in 2006 to what is estimated at about 37% only in 2011 is one of the major achievements of monetary policy through professional management in the Central Bank. The success of the Bank’s policy in the stability of the currency through stability of the exchange rate and maintain the transparent management of foreign exchange reserves and inspire confidence in the monetary situation and achieve an acceptable degree of economic stability after years of hyperinflation, which crush capacity purchasing power to the Iraqis in previous years did not reflect the current attempts and tireless efforts to weaken the Bank’s role central in the formulation of monetary policy. In my opinion as an economist in March his career in the economies of some 20 countries in my previous consultant internationally in the development planning of the United Nations that such attitudes, which targeted the weakening of the role the central bank become one of the incentives of speculators on our national currency to buy dollar and sell the dinar, which is the opposite of what we expect to want the prime minister esteemed to our economy at this critical stage ..

Second, it must be noted here within this context that the estimates of reserves of Iraq by the International Monetary Fund report issued in March 2011 was not more than 7.5 months of imports of goods and services in 2011. The report forecasts the International Monetary Fund reserve ratio to decline in the number of months to 6.9 months of import in the current year 2012. ………. Thank Zmalaa in a network of Iraqi economists Dr. Walid Khadduri and Dr. Ali Mirza for their remarks on the value out of this paper, sent to colleagues in the network of Iraqi economists on April 14, 2012. IMF – Second Review Under the Stand-By Arrangement, Request for Waiver of Applicability, Extension of the Arrangement, and Rephasing of Access, March 4, 2011, Table 10, p.25

The same source above, Table 7, p.22 ……..

Despite the potential increase in the size of the reserve for more than the IMF forecast in its report referred to, but that such figures do not refer to the large size of the reserve compared with the volume of imports of the economy depends on oil, mainly for hard currency, the economy is threatened Balankhvadat periodic potential in oil prices as well on the problems and the risk of closing the Strait of Hormuz if things more strained between neighboring Iran and the United States. The prices of Brent oil during the last few weeks of about 128 dollars a barrel to about $ 120, which required caution, it is possible to lead the worsening financial and economic crisis in the euro zone to the gloomy outlook for speculators international oil markets may lead to a significant decrease last prices to at the international level. As is known, the outcome of Iraq’s hard currency is a function of prices and quantities of exports, and therefore the budgets of state and the stability of the Iraqi dinar will require an economic policy that a prudent balance between the necessities of expansion spending, investment and stimulate the production and the demand for productive employment on the one hand and the maintenance of price stability (including the dinar exchange rate ) on the other.

It must be noted here that the frequency of allusions to the Reserve Grand for Iraq and the signal is studied quantitatively by some economists as Dr. Mahdi Al-Hafiz in his article prior to two months in the Journal of his institute “dialogue”, entitled “What about the reserve?” Add to an article by Mr. Abdul-Hussein Anbuge few days on the subject has become the trends affecting the political system basis in the country to weaken the role of the central bank at a time that requires the Iraqi economy to increase the proportion of reserves to imports to a minimum of 15 months.

Thirdly, I have said colleague Dr. Ali Mirza in a written intervention in a network of Iraqi economists to the possibility of higher because of a “real accumulated surplus” in the Ministry of Finance due to the spending allocated to prior years, although budgets had planned for a deficit. This surplus in the government budgets of actual (not programmed it) became known and anticipated at this stage, which was where the oil revenues and prices much higher than made obligatory financial budget for 2011 has already been to Dr. Hussein al-Shahristani, and said in a statement to the significant increase prices of Iraqi oil exported during the year profits. There is no doubt that the history of fluctuations of world oil prices should become a catalyst for caution and vigilance, what may be in financial deficit or surplus as last year may turn to reverse it. Thus, the presence of excess financial budget of the year 2011 the actual (not planned), and most cases also a financial surplus accumulated from the budgets of previous years should limit calls from ill-considered by some to use central bank reserves, but invites us to ask the officials of the affairs of the national economy, improve the management of and professional and efficient investment and public sector spending constraints and solve the basic start handcuffed the two activities of industrial and agricultural Batharhma observed the operation of the unemployed. It must be noted here, that the success of the Bank ……… Has agreed with me on this ratio, Dr. Ali Mirza orally at our discussion of this matter. In a debate on Al-Iraqiya television a few days ago, was one of the MPs eager to invest in European real estate reserves due to higher returns over the past twenty years, which unlike the lack of knowledge in the function of the reserve. The primary function of central bank reserves is to maintain exchange rate stability and the financing of imports when the solutions to financial crises, which necessitate the investment of the reserve in a way that Tauferokpr degree of liquidity to the economy when solutions of crisis, and this should be left to the Central Bank and the departments specialized result of long experience in this area . ………

Central to reduce inflation rates measured by the index of consumer prices from 27% in 2004 to about 5.5% in 2011 and the relative stability of the dinar exchange rate are two of the successes of the few of the economic policy of Iraq after 2003, which were mostly inclined to a lot of confusion because of poor equipment management Finance, Planning and follow-up implementation of programs and lack of professional capacity required.

So, if there is a significant surplus in the actual budgets of the State, and the central bank’s job leading the legal and constitutional fundamental in achieving an acceptable degree of stability of prices (including exchange rate of the dinar), we must ask here:

(1) Is advised the gentlemen of influential advisers, Mr. Prime Minister advice scientifically documented figures on the need and the possibility and the results of the use of reserves, especially in light of availability of a cumulative surplus in the general budget of the State and approved by the House of Representatives?

(2) Was this advice, a weak scientific and statistical grounds, for the benefit of the national economy and to Mr. Prime Minister, or creating the problematic institutional and economic, without objective justification?!

(3) you down Iraqi dinar exchange rate against the dollar after the crisis that emerged to the surface and have stimulated speculators to buy the dollar?

(4) should not cost the shock brought about by such interventions, which hit the dinar exchange rate citizen rise in the cost prices of imported food, especially in the event of continuing climate of instability on the outcome of monetary policy in the country and the government’s intention to dispose of the reserve, which is indicated by these debates and articles some of the advisers limited experience in the market economy and Tdakhalath?

(5) What Hoahadjm optimization of the reserve in order for the monetary authority to maintain the dinar exchange rate of degradation, especially that of our memory Iraqis still alive when he led excesses of the financial authorities to the reserve and in printed money without objective criteria to the collapse of the exchange rate to about 3000 dinars per dinar?

(6) Gentlemen forgotten today advocates the use of the reserve by the government – despite the existence of an actual surplus in its budget for the past year – what dragged such policies under the former regime to society of the inflation spiral crush the middle class incomes and poor? Do you have forgotten the high index of consumer prices by 235% per year (prices ………… Calculated number of data indices of consumer prices as published by the Central Bureau of Statistics on its website. See https://www.cosit.gov.iq

The same source ………….. Fixed for the year 1993) from 6.3 in 1990 to 2672.9 in 1995 when the state printed money without controls and the Mall of Hussein Kamel (in his ignorance of economic affairs) the establishment of two-story bridge in Baghdad, “two tons of paper,” according to what is common and a trader?

(7) Is it forgotten these gentlemen in the midst of their enthusiasm, “upward” to justify the use of the reserve horrors that her jar of government interventions to monetary policy, which resulted from a high index of food prices, from 5.1 in 1990 to 3167.4 in 1995 (at constant prices of 1993), ie, that prices Food for all citizens multiplied 621 times in the half of that decade of devastating time?

(8) and last but not least, if the gentlemen they wanted “greater coordination” between monetary policy and other were right not aspire to act haphazard reserve the Iraqi currency, JM them better starting first (and the same enthusiasm) to activate the work of the private sector and its investment and operating in? Not worth the sectors of agriculture, industry and develop the same moral courage (who tried to make him known recently) when standing in front of the interests of “business lobby” that contributed to disable the tariff law after its release in the last year? Alice and directing their concerns towards the accelerator to activate the best tariff law of the Iraqi economy from overtaking on the resources that Hvdt exchange rate of deterioration? Would not it be activating the tariff law providing protection for its farmers and industrialists Iraq and a catalyst for productive activity which will create many opportunities of productive jobs for the unemployed? Would not it be expanding the operating industry and agriculture, due to the required protection of the most important tools to combat poverty and achieve social and political stability in Iraq?

So, did these calls aimed at attenuation of monetary policy and weaken the institution rooted Iraqi her credibility and transparency of replay acquired through which agents have confidence in the inside as well as dealers and international institutions abroad, which led to a few successes in comparison with the rest of Iraq’s economic management devices? Is all this to capture the capabilities of the country’s cash reserves, which will lead to attenuation of economic stability and the deterioration of confidence in the internal and external reputation of the monetary and fiscal Iraq? Does all of this is acceptable, gentlemen O Cram, and in the possession of the Ministry of Finance accumulated surpluses of the Council of Ministers will appoint the current plug (not the actual schematic) in the budget in 2012 and probably also in whole or in part of the deficits for the future?!!