CBI Deputy Governor: Resolve the contradiction between the country’s economy and the dominance of the free market?

09/05/2012 0:00

Lost in the equation of the Iraqi economy D. The appearance of Mohammed *

Not to the phenomenon of deterioration in the terms of the Iraqi dinar exchange rate in recent months after the end of spring stability experienced by the country over the past years is cut off from the causes, nature and methodology of the economic system in Iraq .. Valtrkibh current and even use the near and far that this economy strong rentier is working on two contradictory: first, an economy dominated by the 80 percent of gross domestic product, or the generation of national income not to mention his direct responsibility in the supply of 99 percent of inflows to the country’s foreign exchange which is linked to release cash to the Iraqi Central Bank and cash basis is directly related to the movement of these flows.

The other extreme, a market economy, which has a partial economic and effectiveness largest in the administration of indirect results of the country’s economy reflected by the general budget through spending enormous accounted for 60 percent of the total public spending, and the market is now alone in the outflows from the country’s foreign exchange and acquires the rights of the President and the task purchasing power of the Iraqi dinar has the desire to obtain foreign currency from the central bank accumulation of reserves in foreign currency, which is a cover for those rights.

In the equation of the dominance of free market and the launch of freedom of foreign exchange and the use of open-door policy in foreign trade to the private sector with the absence of vision is important for strategy development, development and promotion of economic reality, has turned the economy into a bilateral severe rentier in the supply of foreign currency to foreign trade, finance trade import nature of consumer pure and to allow for opportunities to profit optimization and investment in foreign economies and to make Iraq an incubator for the consumption and collection of wealth and economic cans exported to outside the country. The Central Bank of Iraq is working in this equation, lost and conducting a policy of keeping the stick from the middle to balance Tnaqdan I: State Economy and Msajrih for this economy, rentier great and the other: keep up with the free market, a market lackluster serve the marketing activity of internal and the movement of money around the outside regardless of the desired results in building the economic model generates traffic flows within and beyond the foreign currency free from this duality or polarity severe between economies with different (state and market) and Tdfiqin (flows in foreign currency included provided the country’s economy and flows out of that currency captivating by the private sector in one direction out of the border without look at the back).

Is monetary policy the central bank is able to change the compass paradox?

The Bank of the Iraqi Central as we noted the policy of intervention in the exchange market did not have the space to enter into its mechanisms of cash to reach a stable level in the Iraqi dinar exchange rate in an attempt has been successful in testing its means to address the expectations of inflation, stemming from the concept that monetary policies, contemporary are the policies that resolved the art of managing expectations. On this basis, Tnamt national market exchange rates stable and stability in the general level of prices and falling inflation to place the decimal one after that hit rates stages is high, as well as higher central bank reserves of foreign exchange to the favorites of decades in terms of dollar value, the highest in the history of the country.

But the central bank was unable to resolve the contradiction between the market economy and the aspirations and Frdanith profit towards the aspiration of the country’s economy and Frdanitha in the search for profit and it lacks the social vision of the economic movement of the economic system in Iraq. This is how a complex equation and missed making the national economy and the search for solutions has served as ship economically without a captain, degradation of Iraqi dinar exchange rate is not the result of weakness in the financial sector of the state (public finance and central bank), but is the product of those who settle the conflict and holding the helm of the master and any direction in the waters of the economy surging towards the Iraqi border outside the estuaries.

The trend towards economic freedom throughout the last term and swapping rights maintained in dinars and compensation in foreign currency and stabilization of the fact that the Iraqi dinar covered completely in foreign currency and according to the mechanism rentier where he was born the country’s economy the Iraqi dinar and a link that surpluses were associated with three budgets: the surplus in balance of payments, the state-dominated Oil revenues and the revenues which resulted in the general budget spending in Iraqi dinars for the benefit of the market and generate at the same time reserves in foreign currency or a cover version of the resulting cash and which are in the balance sheet of the Central Bank. Thus, the obligations facing the Iraqi dinar is a restriction imposed by the market on the balance sheet of the Central Bank by check spending in the general budget of the monetary policy instruments and objectives, operational, as a request generated by the market should reward offer completely lacks the production base, which impose a burden continues on the monetary policy of the Bank Central to interfere with daily and sell the dollar to maintain the stability of the internal and external values of the dinar (and here we mean the State Department’s Iraqi dinar exchange rate).

The fork is in dire need of the power of decision illustrates the general lines of the Iraqi economy either believes fully that the transition to economic freedom and open-door policy and take attrition happening in oil revenues and the flow of foreign resources cross borders to ensure well-being of the individual and the confidence in and stability (as long as the curriculum development and stability Mnachadtha stalled in the case of Iraq and walk the ship at night with the power to authorize an order of Allah to change the case of the national market and individual behavior through the creation of investment inflows and outflows for the money). This is determined by the political leadership of the country and Aigrrh central bank in the economic system has not completed its features and Atjahth and Aadiologgioth always are talking about the transfer of $ 180 billion between the years 2003 and early 2012 the rights to holders of dinar generated by the country’s economy class basis after spending $ 450 billion through public budgets for the period itself and benefited from economic prosperity and fragile consumer savings outside did not benefit from development economics to the absence of curriculum development and Mnachadtha live in a country attractive to oil resources, its consumers are at home and Mdkhrōha look out towards the outside?.

Are policies halves restore balance in the exchange market?. Living the country’s system of currently rates the exchange rate of Iraqi dinar to the dollar two prices is called the Dual, which is started with the intensity of conflict and contradiction between the concept of the country’s economy and defense mechanisms and principles of a free market economy free of state controls in the movement of money.

Unless resolved the economic vision for this paradox today before tomorrow, and release mechanisms of the free market as desired emerging economic powers after 2003, the results of economic stability will continue to vague and will make the country live on the disorder exchange markets parallel gray or black to indeterminate in its results and may be severe in price stability and standard of living and concerns of a painful day in the economic life of the Iraqi families and the general economic activity.

Thus, the lessons require the formulation of the economic equation after the loss of one of the maxims which faith the economy of the state intervention and carry Mrkzyatea various degrees of tension in or faith in economic freedom according to the mechanisms that co-existence by Iraq in the last decade, regardless of its disastrous consequences and the lack of visions in the events of the development of a real little in order to establish the future of the economy of the national market and its integration into world markets in real investment, financial, and others to meet the stability and prosperity in the lives of some segments of the people and take the sacrifice of high attrition in the reserves, development stalled and the continuation of forms of unemployment as we are experiencing now, or enter into a new contract for the country’s economy is built on the interference of large towards development of major events of the economic leadership of the institution of the state to build a modern economy and the use of large-scale infrastructure and provided with promising rates of inflation represents the sacrifice of another type of community should bear!.

* Deputy Governor of the Central Bank of Iraq