Dinar Reporter (IQDUSD)

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By bambaboo Role of the Central Bank of Iraq in the economic environment protection

2008-04-21

In a tight monetary policy by the Central Bank of Iraq facing the Iraqi economy, in fact, the first two problems is hyper-inflation, which reached Mtostath annual reports by the Central Bank of Iraq, including over 50% (with the clarification that inflation is a phenomenon of the constant increase in prices of goods and services, if the salary places one is inflation uncontrolled release).

Against this was necessary for the Central Bank of Iraq to pursue a tight monetary policy in light of the increase unusual according to international standards in order to absorb and combat the phenomenon of inflation. But the question that presents itself (Is that the timing of initiation of this policy hardline appropriate and optimal). Phenomenon and the other is the phenomenon of unemployment and the disruption of productive activity and about the activity of these phenomena are relatively ineffective and for the oil sector, which now represents about 75% of GDP composition of the Iraqi economy is a central resource of the State and responsible for finance 95% of the resources of the State budget. In view of the structure of the state budget in particular, we find that their ongoing support and salaries and wages, and funding expenditures constitute more than 80% of those expenditures, especially salaries and wages, various forms if they attributed to the gross domestic product, the non-oil found more than 60%, which is supposed to natural conditions* that no more than 5 8% would mean that there is pressure demand or high Hmula total expenditure of the oil sector over the activities do not contribute to the gross domestic product to less than 25% and mean that there was a drop in productivity is not commensurate with the magnitude of expenses. Despite severe economic problems the improvement of the oil sector in terms of revenue because of improved oil prices during the last three years making the purchasing power of the dinar from the Iraqi perspective on the real exchange rate is higher than the nominal exchange rate of the dinar against the American dollar through stability operations, as reflected in selling and buying in the auction Daily currency at the Central Bank over the last two years.And the decline in the exchange rate of the Iraqi dinar at the nominal price of the real has contributed in one way or another in inflationary phenomenon (these look Central Bank of Iraq for inflation), and by up to 20%, but this figure rises and down according to the monthly economic circumstance. If we take into account inflation index base means (the consumer price index minus two paragraphs of fuel and lighting, transport and communications) and therefore for the Central Bank of Iraq to adopt strict policy priorities of upgrading dinar nominal exchange rate to absorb its real important aspect of core inflation and influence the levels of liquidity and slow down the circulation of cash and dealing with the dollarization (tyranny of the dollar) with the Iraqi dinar makes a stable cash transactions of individuals.

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