The central bank issues an explanation about the concept of foreign currency reserves
The central bank issues an explanation about the concept of foreign currency reserves
Posted, 2020-06-26
On Thursday, the Governor of the Central Bank of Iraq, Ali Al-Alaq, issued a clarification on the concept of foreign currency reserves and its uses.
Alaak said in a statement today that “with regard to the uses and concept of foreign currency reserves (cash, deposits, bonds, gold) with the central bank, unfortunately some understand the foreign reserves of the central bank as a surplus invested abroad.”
He added that “the real financial surplus the government has from surplus funds that it invests in various forms such as sovereign funds and investment funds, and generations funds and others … As for the reserves at the central bank they correspond to the dinar issued to the government or others it is a cover for the local currency and must not be less than the level of adequacy It is determined by international principles, otherwise the value of the local currency (the dinar) will collapse, as happened in the previous system. ”
He continued: “As for how the reserve is managed in terms of the type of currencies and the type of instruments, they are governed by internationally recognized rules and in all central banks, and we follow the same rules and in the subject are complex and broad technical details.
It should be noted that when the government borrows internally, it is tantamount to withdrawing from foreign reserves because the dinar that it borrows is pumped to the market and turns into a demand for mostly imported goods and goods and the payment of foreign liabilities, and it (the government) does not put a dollar in exchange for it, leading to the withdrawal and reduction of foreign reserves.
burathanews.com
