Shabibi goes on to describe how it is used to ease pressure in the market.
Quote: The auction process and mechanism begins to withdraw the Iraqi currency
Quote: and ease pressure on the market
Quote: and is being done through swap cash dinars dollar
Swapping dinars for dollars, through the auction, the process eases pressure.
The question is: How much dinars are they recycling back into the market?
The answer to that is: JUST ENOUGH TO keep the auctions going, about $200 - $300 million dollars’ worth per day, 6 days a week...
This is why we read about worn and torn out dinars, and low liquidity articles....
Here again, the good ole Dr. Shabibi reconfirms that the USD is used for other things as well:
Quote: And the dollar when he leaves the bank does not finance commercial operations only, but is used to finance all payments under the so-called international balance of payments, which depicts all the international economic relations of Iraq with the world كالدفع for services and for investment in overseas operations.
This is what we want to see changed, we need to see that the Iraq Dinar is used internationally, as a convertible tradable currency. Even though the USD, we hope stays as the Petro-dollar and if so it will also be used for these big import deals we need to see the dinar as their main currency, not the USD. This is why our speculation has merit.
Ok, take a minute and take in what I just wrote above before moving on to this next part:
Here Shabibi talks about the present administration, Turki’s as governor and his people.
Quote: The work of the central bank should focus on preventing the parallel currency market or multiple markets.
Quote: Multiple exchange rates is (are) contrary to the central bank law because it conflicted with stability in domestic prices.
Quote: The difference between the bank rate and the market rate should not exceed 2%, according to the Convention on the International Monetary Fund and signed by Iraq in 1945.
I believe he is saying that acting Governor Turki had let the parallel market get out of control according to the standards that the IMF states it should be. I also think he had set up guidelines to prevent this but they did not follow it. Is this a sign that Shabibi will be coming back? I sure hope so!
Here he goes on to describe what I also have pointed out many times in the past:
Quote: We maintain monetary stability through the float of the dinar in the market mainly with monitoring for the purpose of his administration as needed so that it serves the Iraqi economy,
Quote: so we follow the orbit and flotation system because of the large reserves around this flotation to stabilize the situation.
Quote: We have to be in front of the waste if it does not receive when we sell Iraqi currency dollar.
He says that they are using the Float of Orbit as a flotation system to stabilize the situation but Turki put to many restrictions on it and the parallel market got way out of line.
Do you see how he is talking, "We have to be in front of the waste", like he is still involved and he does this throughout this article and this is what makes me believe he is still in the game.
The waste that he is speaking of is the waste over that 2% area, the difference between what the IMF says it needs to be and that high black market rate of 1320 that Turki let it get too! Read these quotes to understand to better:
Quote: this will lead to the decline of the dinar and therefore are going to need more dinars to buy the same amount of the dollar, which will lead to the kind of loss or wastage.
What Shabibi is saying is that since the dinar is much more stable now they need to make sure it doesn't get out of hand from now and until they are ready to launch reform.
Quote: Therefore, the central bank is keen to keep the relationship free from fluctuations with the dollar whenever possible as he is keen to reduce the difference between the official price and the market price, which as mentioned should not exceed 2%.
Here he says that Iraq is OK despite the GOI and their lack of implementation of the investment budget:
Quote: We have succeeded in maintaining the purchasing power of the dinar and stability in spite of the problems of political stability and inefficient implementation of the government investment budget.
With the upcoming National Meeting, the signing of the Honor Document and the stability of the politicians I believe that Shabibi has just brought us up to speed on why, when and where the dinar is headed.
I believe that we could see a change in policy now, a change in the value of the dinar and then they could start removal of all the three zero notes starting at the beginning of the year.
We as always will wait to see this play out but I really like Shabibi bringing me up to speed.
Happy Monday,
Stryker
