09/1/2018 12:00 am
The talk about the flotation of the Iraqi dinar may be too early for a set of economic, financial and political standards that prevent
As the method of floating in the management of monetary policy, necessarily need to market elements are formed in accordance with regular relations and based on real sectors contribute a large part of the gross domestic product in a legal atmosphere that establishes an economy led by a private sector free of the dependency of the state with adequate performance and flexibility of the
productive apparatus .
This is not true of the current economic landscape, as well as the ability of the Iraqi economy as a “rent-dependent economy” that relies on 85 percent of the budget revenues on oil. It maintains a safe cash reserve in the central bank’s coffers through monetary exchanges between the central treasury and the central bank.
Which makes this reserve in spite of the daily auction sales of the dollar within the limits able to control the price of the dinar on the basis of the reserve equation with the amount of
Floating is a tool for managing monetary policy in a market economy. The exchange rate is left to the market mechanism determined by the forces of supply and demand in the money market. Central banks’ policies differ from the floating of their currencies according to the economic data determined by the levels of GDP, balance of payments and trade balance.
Usually depends on the so-called “floating float” policy in countries whose economies suffer from crises, whose exports are less than their imports, leaving the exchange rate to be determined according to supply and demand with the intervention of the central bank whenever the need to modify this price against the rest of the currencies, Among them the gap between supply and demand and developments in
parallel exchange- rate markets .
The developed capitalist countries rely economically on the so-called “free float” method as producing countries whose export rates exceed their import rates. Their budget revenues consist of the total tax collection, service fees and customs. The exchange rate is left to change and is determined freely over time according to market forces, In this case, the intervention of central banks is limited to influencing the pace of exchange rate change, not limiting it
However, the Iraqi situation is completely different here from the two models above, because the Iraqi economy is exceptionally prosperous and still suffers from structural imbalances. The real sectors and the sectors that support them do not contribute more than 8% of the GDP.