09/30/2015 (00:01 pm) – the number of readings: 297 – number (3466)
Dr.. Sinan Mohammed Rida al-Shibibi
The central bank oversees the flow of cash the way you prevent inflation, this is the main objective of the bank, which does not fall within the terms of reference of his duties or the financing of productive projects (agricultural or industrial), this is a long-term and the central bank projects focused his work on the short-term. This is one of the basics of working in the Central Bank.
It may be argued that lending to finance such projects is through the banks, but lending does not become possible without the Central Bank’s initiative to provide money to banks. It lending to productive sectors, and the repayment period may take a long time, which could conflict with the short-term monetary policy nature.
If we want to talk about the contribution of the Central Bank in the development of an initiative targeted by the central bank recently it is mainly a financial contribution, and the followers of monetary policy should not reduce their contribution to the development of the Central Bank, such as work on price stability and financial stability and credit regulation, only Article 3 of the Bank Act The Bank operates in line with its goals to promote sustainable development. But the rest of the goals of price stability and financial priority in all cases. That the author of monetary policy to appreciate the importance of the relative weight of each of the stability and development, which applies to monetary policy indicators and details. The choice between stability and development issue are especially important when carrying the country’s resources. We would like to make it clear here that when the central bank refused to years of lending to the government before were not the government’s problem of choosing between stability and development, the government did not really need the resources of the bank.
The central bank to serve the development and creates the right environment it by achieving monetary and economic stability, and the reserve bank Central is a supporter of the stability of the exchange rate and paving the economic stability, we are not talking only about savings, and cash reserve to be used only when depleted government resources or on its way to depletion, but saving it is used when there are no adequate resources.
To illustrate this point we are indivisible Article 3 of the Central Bank Law between the goals of stability and development, as the article states that he ((the main objectives of the Bank include the stabilization of domestic prices and work to maintain a stable financial system is based on the competition in the market. The Bank operates in line with the above to promote development goals and sustainable job creation and prosperity in Iraq)). This article includes Astaqraraa part and part developmentally, Vaadaat banks in various bank facilities remain in the central bank and the bank launched to the market (by tightening monetary policy and restricted) because of the inflationary situation in the market and there is a need to economic stability. But these deposits will go to the market (by easing monetary policy) if there was a case of a deflationary such as that experienced by the Iraqi economy at the present time. This movement between the bank and the market is determined by monetary policy used by the Bank as a policy indicators. Jabihna have difficulty in the banks’ resources move into the market because of the security situation, which has identified one way is to access the foreign currency market. It was on the government and the private sector could provide the right conditions in the market, politically and economically even some of the resources transferred from the central bank, for example, if the bank decided to cut interest rates in different its facilities will move depositors to the market.
The holding of the last central bank, which aims to lend to banks, and then sectors can that comes through the conversion of local currency through facilities provided by the Central Bank, and the problem in this style was the use of resources can have a role in the activation of monetary policy and expand its role and increase their flexibility. The global financial crisis has led to the central bank to come in the field of quantitative management policy, which went under which the central bank to print money and lend to banks. This is not linked to specific sectors, and encourage this policy is the situation prevailing recession that will make the goal of monetary policy and the central bank the transition from fighting inflation to the activation of growth.
The contribution of the Central Bank in the development be either by easing monetary policy and lack of emphasis or by creating the conditions for financial facilities development for use as the central bank tries now in Iraq. Also, inflation ranks of lesser importance and therefore, the lending financial or financial assistance and generated growth is gaining more importance.
The Bank’s lending for projects characterized by long Bomayor, but any developmental nature of monetary policy should be guided by policies and not the money, Ketbna low interest rates, for example, or reducing the statutory reserve . We must be wary of reserve depletion That will require reducing the value of the dinar.
Bank initiative should have focused on the adoption of a very lenient monetary policy, which provides for banks in funds used developmentally. In this case, the central bank will remain loyal to its monetary policy.
There is no detail about how they will provide the resources as a result of the initiative of the Central Bank, but organizers may resort to this initiative to print money or use the reserve or mitigate the sizes of monetary policy elements, which will lead to the loss of elements core used in the fight against inflation, and the results of all this unwanted, the most important weakness of purchasing power and the weakness of the exchange rate.
should not the central bank loses its ability to protect the exchange rate and domestic price stability. Therefore, there is a need for coordination between monetary and fiscal policy. For these recent policy must reduce the deficit to a great extent where the budget should be based on the sharp austerity. Borrowing may be necessary, but the most important is the ability to borrow to pay it, taking into account the new conditions of the resources in Iraq.