The Economic Advisor to the Prime Minister, Mazhar Mohammed Salih, has denied that the Iraqi currency is short of liquidity.
Saleh is quoted as saying in one of the many meetings that “all is fine with the liquidity at all since it is covered with unfamiliar money,” showing that “the system for getting cash liquidity is that oil deals are changed over into US dollars, and when the public authority needs the dinar for inside trade, it trades oil deals for dollars and goes to the money giving bank which is the national bank to give it the money.”
“The Central Bank, for the sake of stability in the market, sells foreign currency to the market through a window and auction of the currency sale to withdraw liquidity again and repeat it to receive natural growth in the issued currency,” he said.
He said, “Iraq was exposed last year and early this year to consistency problems, and there was a major audit of monetary transfers and there was a failure in about 70% of transfers, so this doubled the retention of liquidity,” adding, “foreign assets exist, but the supply of these assets in the market doesn’t equal the government’s supply of foreign assets for the Central Bank.”
That is what Mazhar Mohammed Saleh noticed: “For this instance whenever the public authority requires liquidity in the Iraqi dinar the money issuance raises meaning instead of absorbing it from the market another issuance occurs and this led to a spike in the issued currency but there is no problem with that since it is 100 pct covered.
“The liquidity increased during the year, as the issued currency became about 100 trillion dinars after it was 80 trillion dinars,” Mazhar Muhammad Salih said, describing the size of the monetary mass. He added, “These booms do not have an impact as long as they are covered by foreign currency.”
