Calls To Cancel The Dollar Sale Window On The Pretext Of The Great Corruption That Accompanies Its Work
Calls To Cancel The Dollar Sale Window On The Pretext Of The Great Corruption That Accompanies Its Work
March 16, 2022
The Independent/- Dollar sales operations through the window of the Central Bank are economically classified according to the Open Market Operations method, and they followed in Iraq a year later the political change for the purpose of controlling the exchange rate, which is an important part of monetary policy, as the exchange rate was considered a nominal fixer for the policy. After the interest rate lost the ability to influence due to the structural imbalance in economic activity caused by dependence on oil and the atrophy of investments and the loss of their flexibility to a large extent towards the interest rate, on the other hand, the internal market became highly dependent on the outside and the goods and services supplied to it. The fixing of the exchange rate controls the general rate of prices to a relatively large extent.
The monetary impact of the window plays an important economic role in the field of the duties of the central bank within its central goal in controlling inflation by influencing the monetary mass within the economy, and here the process indicates to us another structural defect, as the government’s monopoly on the main resource in the economy, which is oil and the proportions it constitutes It is high in GDP, with an average rate of more than 48%, its concentration in exports is 99%, and its contribution to budget revenues is at an average rate of 92%, and therefore it is the largest contributor to the improvements in GDP. The issue here is that these government revenues achieve a growing ability to spend, Since the process is based on a barter between the Ministry of Finance and the Central Bank, the first party grants the dollar to the second party and it becomes a debt on it, so that the second party compensates it in dinars to return it to the Ministry of Finance.
And since the volume of output is dependent, according to the mentioned ratios, on oil and it is in a productive development, as the production capacity has reached five million barrels and it is hoped that it will reach eight in 2027 according to the ministry’s plans, and these expansions lead to improvements in output, and here is the most important reason for the growth of the monetary mass issued by the bank according to the equation mentioned, as these increases are added to the activity mainly through government spending.
The control of inflation rates lies in the procedures of the window, as it withdraws part of the cash mass by exchanging the window dollars for the street dinars, and this is a process (sterilization) of the effects of government spending, which is a very expensive process, and one of the factors that undermine capital accumulation.
We point out another structural imbalance, which is that the dollar’s only source is oil, and the concentration ratio proves this, and then meeting the demand for the dollar internally to cover imports has no way except by withdrawing the government dollar, and this is what the window does, which means that it is important on the financial level, as it is The guarantor of the flow of goods is also important in monetary terms, as the bank was able to control inflation rates by withdrawing the inflationary impact of the continuous growth of the monetary mass as a result of government spending.
Here is the response to the calls to abolish the window on the pretext of the great corruption that accompanies its work, and the calls for (dollarization) without understanding its impact. The solution in the short term lies in the legal treatment of corruption in the window, but in the medium and long term, it is the treatment of the structural imbalance that imposes the existence of the window.
mustaqila.com
