Showdown between Shabibi and Iraq’s Planning Minister over currency auction and smuggling issues

«Auction» foreign currency by the Central Bank of Iraq on a daily basis, the recent subject of argument between the Iraqi Central Bank Governor Sinan Al-Shabibi Dr and Planning Minister Mehdi Al-Hafez, former Dr. «Downloads» accompanied sparring through an exchange of letters I got a copy of them.

The first message sent by the Governor to former Planning Minister, commenting on the statement of the Secretary-General of the Council of Ministers on relations which revealed that the amounts smuggled out of Iraq in recent years is estimated at 180 billion dollars, and that less than 5 percent of remittances are legal ways.

Al-Shabibi said: that these amounts sold in auction» foreign currency and is around 180 billion dollars, used to import large quantities of goods, raw materials and consumables, and pay the salaries of retired Iraqis living outside Iraq and curative services, travel and tourism, there is no Government other than the Central Bank capable of providing import amounts in foreign currency to serve the demands of the Iraqi economy. He added: these transfers are not smuggled money, but money was used to meet the needs of the Iraqi economy and people inside and outside Iraq, banks has opened hundreds of documentary credits are documented at more than 100 billion dollars since the year 2003 and until the year 2011, legal means and not by illegal means, and publish.

Al-Shabibi believes that the Central Bank of Iraq, and to the extent that monitors the movement of financial flows entering the country and out of it as normal economic phenomena that help maintain a stable financial system based on competition in the market, and at the same time generates the desired integration in the international financial market, and open wide in banking with the world.

Adds that restrict transfer or regulating the flow of funds out of the citizens is not consistent with the trend that the Iraqi dinar convertible with the equivalent thereof of currency inside Iraq, adding that this would be contrary to the freedom of conversion and Iraq’s commitment to the international conventions, in particular the application of the provisions of the texts of article VIII of the IMF agreement which obliges Member States to adopt freedom of conversion and the lifting of restrictions to the movement of funds citizens except for irregularities resulting from money-laundering and the financing of terrorism.

In his letter, Al-Shabibi dwells, says: in the absence of any regulations or instructions governing foreign trade especially import since 2003 to date, the Central Bank has two options: either to try and establish controls to regulate the conversion or permanently dependent on financing of foreign trade because of the lack of regulations and instructions. And impossible to go to the second option contained halt financing of foreign trade through auction, because doing so would stop importing entirely by the private sector, its devastating impact on Iraq’s economy, the Central Bank creates its own controls on to window buy and sell foreign currency without charge under provisions of its existing or any law or regulation or the Help window.

Al-Shabibi goes on to say: that various means of monetary policy, including an auction that began the Central Bank of Iraq to design and implementation since 2003, the key under the new economic system based on the free and unrestricted economy, the Constitution and the law on the Central Bank, monetary policy cannot work alone in the absence of other economic policies, such as trade policy, fiscal policy and investment policy and employment policy, tax policy and the national development plan. It cannot load the CBI and monetary policy problems facing the Iraqi economy that CBI does not work based on single-window method, so it can not be on behalf of other ministries and departments continue to use money and goods to Iraq.


And Dr. Mehdi Al-Hafez was following the letter of the Iraqi Central Bank Governor Sinan Al-Shabibi Dr letter got «downloads» also copy them: that foreign currency selling window designated letter Alshabibi error «auction» is a channel for the delivery of foreign currency from the first source is the Ministry of finance, oil, to the private sector, which must in all circumstances in Iraq and similar countries. Availability of foreign currency, government source to the private sector of a country’s economic system constructs oil, and this particular one is not a choice, and not monetary policy in itself, must be managed channel somewhere to bring foreign currency to the private sector.

Al-haafiz said: the directors of the window is not considered intervention in the exchange market, because the interference-this concept-assumes independence of the Monetary Authority on the foreign exchange market, a complete offer in case of deficiency and excess reserves are deducted to add to it, the Bank is the supply side of the market: determines the exchange rate that has not changed in the last three years and buy the quantity required by the approved price. The difference between the Ministry of finance for the Bank sales and sales to the private sector to add to its reserves. Either say “to defend the exchange rate of the gyroscopic …» It is irrelevant, because it sets the price and buy the required quantity, thus keeping the market price with official price.

The purchase of foreign currency from the Ministry in exchange for dinar, and is an expansion of money supply, reduced sales to the private sector. And plus the corresponding reserves plus cash basis on the liabilities side of the balance sheet of the Bank, each critical edition after 2003 was due to the Bank NET buyer of foreign currency. The critical edition is the central purchasing foreign currency, and there is no other way to that bank lending Government and other Iraqi institutions, and we hope, once again, be described as cash operations, this policy helps to understand what exactly by the Central Bank.

Dr. Hafiz concludes that to say: the purposes for which used foreign currency purchased by the private sector, is the product of the same sector acted in income and foreign currency freely, there is no supported policies of the Bank or others to influence the behaviour of the private sector in General and savings income in particular. Foreign currency provided that only the private sector for the purpose for which the Sha, both for imports or current transfers or investments abroad.

And about what the Bank says that monitors internal and external flows, wondered keeper: how and what specifically monitored by surveillance? And adds: as far as we know there is no closer to these flows a departure or entry, with the exception of oil yield and sold part of it to the private sector as described above, this assuming that as to how what is known and is aware of the implications of this observation? Adds keeper: a reading of the Bank of article VIII of the Convention on International Fund hasty and exaggerated came, because the article does not impose across-the-Board liberalization of the balance of payments but also of ongoing operations: import and export of goods and services and other paragraphs. It is known that International Fund Convention did not impose on Member States absolute freedom of capital movements and incomes, but vice versa, since the Fund may request from the member limit capital movements, if requested, a member of the assistance from the Fund, the Fund is satisfied that capital outflows from the causes of balance-of-payments deficit.

More than that, the provisions of the Convention that even operations may be restricted to request the forgiveness member set out in article 14 of the Convention. Such readings of texts of international conventions do not help improve the negotiating position of Iraq, and we hope to be keen on independence of economic decision of Iraq at least keen to assert its independence from the Iraqi Government.