Central Bank Consultant: The inflation and the amount of reserve are determining the policy of supporting Dinar
The Central Bank Consultant Dr. Mudhir Mohammad Saleh, stated on Friday, that the bank depends on determinants of policy in supporting the Iraqi dinar exchange rate against the dollar, and that represented by the amount of reserve, and the inflation rate in the Iraqi market, indicating that raising the price of dinar is one of the methods to absorb the inflation.
Saleh explained that "the Bank used to support the dinar's exchange rate against the dollar as a means to absorb inflation in the Iraqi market, by increasing the purchasing power of local currency against the dollar, which reduces the relative impact of inflation." He pointed out that there were "two specific factors to rule this process, the first is the amount of cash reserves from dollars in the Central Bank, and the second is the ratio of monthly inflation."
Saleh continued of saying that upon the amount of reserve and the monthly inflation rate ,we can determine the amount of support the Iraqi dinar exchange rate." Stating that "the fall in demand for the dollar due to the drop in rate prices more than in the past, is a temporary situation and will subside over time, and that the benefit resulting from raising the dinar exchange rate, much higher than the temporary effects and the weak impact on the movement of the Iraqi market."
The volume of aggregate demand to buy the dollar had declined in five sessions of the Central Bank of Iraq auction this week, recording a total demand of 421 million and 555 thousand dollars against 583 million and 15 thousand dollars in the sessions of last week. While the rate of demand retreated from the general rates of demand this year, where the rate request to buy the dollar this week recorded 84 million and 311 thousand dollars, the lowest rate in the current year which reached the limits of the 120 million dollars, according to the sources of the Central Bank of Iraq.
The former Planning Minister and member of the Parliament ,Dr. Mahdi Hafedh, stated on Friday, that the Iraqi monetary policy does not match the current economy needs and there is a conflict between claiming about the radical reduction in inflation rate and the reality of the situation in the local market, expressing his belief that real inflation is still dramatically high and certainly what is being mentioned about the reform in monetary policy is questionable.
The Central Bureau of Statistics and Information Technology announced last Tuesday that the annual inflation rate in 2007 rose by 30.8% compared to 2006, and the reason is due to the higher index of most major groups, particularly fuel and lighting group, which rose (71.6%), and totals other rates ranging between 29.3% and 6%.
Source: IRAQdirectory.com
