money on imports and missing out revenue from the surge in oil prices
because the value of their Dinar is too low. Maliki and his advisors
are proposing change for the current system being used to establish the
value of the Dinar. They do not specify what the change would be in
this article.
PM's advisor, economists criticize CBI's monetary policy
Baghdad, 14 May 2008 (Voices of Iraq)
Iraqi economists, including the economic advisor to Prime Minister Nouri
al-Maliki, demanded the Central Bank (CBI) to abandon its tight monetary
policy, because of its negative impact on the national economy,
particularly the policy as to changing the value of the dinar exchange
rate against the dollar at the daily auction which might cause a deficit
in the general budget.
"The tight measures taken by the Central Bank as to the Iraqi currency
value and attempts to raise its exchange rate against the U.S. dollar
would damage the Iraqi economy as a whole," Abdel Hussein al-Anbaki,
Maliki's economic advisor, told a symposium held on Monday in Baghdad.
Al-Anbaki who delivered a paper entitled "Until when tight monetary
policy effects shall continue?" said, "the Central Bank's attempts to
raise the value of the dinar had changed its value in the market and led
to a decline in the value of oil revenues estimated in Iraqi dinars."
He added that this had negatively increased the deficit and pushed for
more dependence on the imports as imported goods would seem cheaper than
locally made commodities.
"Despite prices of oil soared up, the economic cycle ended outside Iraq,
as the beneficiaries of the flourishing dinar exchange rate started to
transfer their profits from inside to outside the country," al-Anbaki
explained.
Maliki's economic advisor also criticized the Iraqi Central Bank's
monetary policy saying "it did not tackle the inflation as imports
remained very high." Iraqi Central Bank (CBI) runs a daily auction on
Sunday through Thursday where Iraqi dinar exchange rate against the
dollar is raised by a tick every week.
Meanwhile, CBI Deputy Governor, Ahmed Burihi, called upon Iraqi
economists to "re-consider the causes of inflation in Iraq," and
stressed that the increased governmental spending "was inflation main
cause."
"Spending, in general, has expanded, while production shrank," he told
the symposium which had the theme (Significance of Economic and
Financial Reforms to Rebuilding Iraq) .
The Central Bank of Iraq, according to Burihi, is not the only authority
responsible for the alleged deficit, as "CBI's attempts to raise the
Dinar Exchange rate were to control the volume of the currency liquidity."
Burihi wonders why the government does not instruct the state-owned
banks (Rafidain and Rasheed) to offer loans instead of only depositing
money at the Central Bank to double the profits given that 93% of CBI
deposits now come from those two banks.
Iraqi financial expert Majid al-Sori dismissed any positive results from
the CBI's policy commenting "the solution lies in developing the
financial process, preferring the production rather than importing and
reducing unemployment."
For his part, Ahmed al-Wazzan, Head of Economics department at
al-Mustansiriyah University, expressed optimism over the future of the
Iraqi economy.
"For the first time, a monetary and financial policy is formed away from
the state control," al-Wazzan said. The academic economist further
noted "the government patronage of every single detail of the economy
has gone and a market-oriented-economy is under construction."
Hamis al-Okabi, Head of Iraqi Businessmen Association, who agreed with
al-Wazzan's view said "the ideal solution for the current economic
situation in Iraq is a mixture of cooperation between the public and
private sectors."
Investment law is only part of the solution which needs also to include
developing the country's infrastructure, developing human resources and
introducing high technology in work, al-Okabi concluded.
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