Economy| 08:54 – 22/03/2023
Baghdad – Mawazine News
The financial adviser to Prime Minister Mazhar Mohammed Saleh confirmed today, Wednesday, that the current cash leakage rate is more than 70 percent, while noting that this leakage has generated an illegal market that is engaged in usury and obscene interest.
Saleh told the official agency, who followed him /Mawazine News /, that “the habits of settling payments and dealing in paying the prices of transactions within the economic community are still based on a legacy of payment, payment and receipt in cash,” noting that “money issued for trading outside the operations of the banking system is a cash leak.”
He added, “The said cash leakage rate is more than 70 percent of the total cash issuance of the Central Bank of Iraq and perhaps more,” noting that “this matter does not help monetary policy to apply its tools in monetary stability adequately and comfortably.”
He added that “this is a cash reward that deducts from the income cycle and does not help the desired investment spending, in addition to the inactive role of this cash mass accumulated outside the banking system, which is exposed to various legal risks, disputes and attacks on monetary ownership rights.”
He explained that “if the cash loans provided by the banking system to the public are linked to the goals of economic development and poverty alleviation and with acceptable interest rates provided by bank deposits to the public itself, the massive cash leakage outside the banking system amounting to more than 70 trillion dinars, has made banks tied to the limits of cash lending associated with the few deposits to the public.”
He stated that “the market and the general public in the private sector still receive limited cash lending that constitutes only 13 percent of the gross domestic product,” pointing out that “an important part of that percentage came through the initiatives of the Central Bank of Iraq in 2015 and subsequent years in order to stimulate the financing and development macroeconomic movement due to the economic recession, although the private sector’s share of bank cash lending in industrialized countries exceeds an average of 106 percent of GDP.”
He stated that “the phenomenon of cash leakage and direct cash use came at the time when the world began to switch to digital money preceded by electronic payment to reduce transaction costs and raise the efficiency of payments,” explaining that “using liquid cash in our country still constitutes a high cost to cash trading services, whether in the operations of currency transfers, its calculation, its promise and sorting in every single cash transaction, in addition to the risks resulting from preserving and trading with large amounts of cash outside the banking system or when settling payments between individuals.”
He stressed that “the cash spill of 70 percent of the total cash issue of the Central Bank of Iraq currently amounts to about 70 trillion dinars, has generated an illegal cash market that deals with (riba and outrageous interest), in which the annual borrowing cost as illegal cash dividends, reaches about 80 percent annually,” explaining that it is “very expensive for illegal borrowers, which hinders development and increases the costs of unregulated economic activity.” Ended 29/m99
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