The Second Central Bank Strategy (2021‐2023) An Approach to Monetary and Financial Reform

 Special Sunday posting  October 17, 2021 Catch Up

The Second Central Bank Strategy (2021‐2023) An Approach to Monetary and Financial Reform 

HEre is the My FX Buddies Podcast for this blog and these are the articles I discussed on the podcast

The Investment Authority reveals a "one way" to finance infrastructure projects in Iraq

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The National Investment Commission in Iraq revealed, on Wednesday, that most of the infrastructure projects that were signed are financed by "investment" and not "the general budget", as was the case in the past .

The head of the authority, Suha Al-Najjar, said that "most of the previous infrastructure projects were financed through the budget and from government funds, but today all contracts signed during the current year are financed by investment ."

Al-Najjar added that "the authority grants the investment license to the winning company for the company to finance through its own sources, and therefore the government does not bear any financial expenses for these projects," stressing that "these projects would make a qualitative leap in the service and economic reality of the country ."

 

Al-Najjar pointed out that "the state signed a series of important contracts this year in the electricity sector through the field of clean energy, including the signing with Total, with Egypt - the UAE and the Norwegian Scatec," noting that "this would preserve crude oil and preserve the environment."

International Investment Companies Compete To Invest In A Civilian Airport In Anbar

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Adviser To Anbar Governor For Energy Affairs Aziz Khalaf Al-Tarmuz Confirmed Today, Saturday, That Three International Investment Companies Are Competing To Invest In Anbar International Airport In The Western Regions.

In An Interview With Al-Ahd News, Al-Tarmuz Said, "A Group Of Turkish, British And American Investment Companies Are Competing To Establish A Civil Airport In Anbar, In The 35th Area, West Of The City Of Ramadi, As Part Of The Efforts Of The Local Government In Anbar To Move Forward In Establishing A Civil Airport In The 35 Km Area." West Anbar.

He Added That "The Three Companies Are Conducting Intensive Contacts With The Central Government To Invest The Airport, Noting That" The Concerned Authorities Are Studying The Offers Submitted In Order To Know The Most Appropriate Offer That Matches The Specifications Offered By The Local Government To The Investment Companies And Send Them To The Central Government For The Purpose Of Approval.

He Explained That "The Area Allocated For The Airport In The 35 Km Area Has Been Sorted And Prepared By The Local Government, Pending The Commencement Of The Project To Establish A Civil Airport To Transport Passengers And Goods, Noting That" The Civil Aviation Authority Has Agreed To Establish The First Civil Airport In Anbar To Transport Passengers And Goods." 

Al-Maliki is moving to form a coalition of 90 deputies to confront Sairoon

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Political sources revealed a wide movement in Baghdad by former Prime Minister Nuri al-Maliki, to form a large coalition that includes more than six political blocs, to obtain the mandate to form the next government.

Al-Maliki's movement aims to collect about 90 parliamentary seats by forming an alliance that includes all Shiite forces except for al-Sadr, who close to al-Maliki says he can join to form a consensus government.

The sources pointed out the parliamentary isolation of those who refuse to join the forces of the (Shiite Coordination Framework) headed by al-Maliki, acknowledging the visit of friendly Iranian figures, and others who made phone calls during the past two days, with the aim of bringing the views of the political parties together regarding the election results.olitical sources revealed a wide movement in Baghdad by former Prime Minister Nuri al-Maliki, to form a large coalition that includes more than six political blocs, to obtain the mandate to form the next government.

Al-Maliki's movement aims to collect about 90 parliamentary seats by forming an alliance that includes all Shiite forces except for al-Sadr, who close to al-Maliki says he can join to form a consensus government.

The sources pointed out the parliamentary isolation of those who refuse to join the forces of the (Shiite Coordination Framework) headed by al-Maliki, acknowledging the visit of friendly Iranian figures, and others who made phone calls during the past two days, with the aim of bringing the views of the political parties together regarding the election results.

The caretaker government holds its session headed by Al-Kazemi

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Thursday, the Council of Ministers held its regular session, headed by its Prime Minister, Mustafa Al-Kazemi.
The Council said in a statement received / scales News / copy of it, that " the Council of Ministers held its regular meeting chaired by Prime Minister Mustafa Kazemi."

Holds the cabinet weekly regular session under the chairmanship of its President Mustafa Kazemi, to discuss decisions and projects listed on its agenda and vote

The Second Central Bank Strategy (2021‐2023) An Approach to Monetary and Financial Reform 

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The Central Bank of Iraq launched its second strategy for the years (2021-2023) in conjunction with the economic and financial reform strategy adopted by the government in the white paper. The new strategy has drawn a roadmap with clear objectives and policies for the next three years in a special, complex and risky economic and financial situation.

And the challenges at the level of internal and external economic and financial relations. What concerns us as specialists in economic, financial and banking affairs is what are the new mechanisms and policies adopted by the Central Bank in monetary policy and banking reform in accordance with the approach of fundamental change desired for the national economy contained in the white paper and the second strategy, which constitutes the banking sector The first and basic in the economy and the implementer of monetary policy applications.

The strategy of the Central Bank set the main objectives at 15 objectives and the subsidiary objectives by 75 objectives and charted the way for banking reform in accordance with the following strategic objectives:-

1- Supporting and achieving monetary and financial stability.

 2- Enhancing and strengthening the banking sector and financial institutions.

3- Enhancing digital transformation in the central bank and the banking sector.

4- Developing the organizational structure and human resources of the Central Bank.

5- Activating and integrating the internal and external relations of the Central Bank.

Since these strategic goals have been set for a period of three years to achieve the main and subsidiary goals, which emphasize the protection of the financial system, the strengthening of financial inclusion, the management of monetary and financial stability, the development of control and supervision, the development of regulation in the banking sector, and the completion of the development of the monetary structure in the Central Bank and its branches in accordance with work frameworks and techniques authorized in central banks, developing human resources, developing banking operations, strengthening the bank's internal and external relations, and representing it locally and internationally. By analyzing the mechanisms and points of action to achieve the above goals, we note that the strategy identified the planning team, the implementation team, the implementation mechanisms and responsibility, as well as clear priorities for achieving reform. Certainly, these priorities were diagnosed in light of the challenges they face.

Monetary policy and the banking sector due to the suffocating economic and financial crisis that Iraq has suffered for subjective and objective reasons, which can be diagnosed as follows:-

* Work to achieve the objectives of monetary policy, the most important of which is the stability of the exchange rate, the preservation of the purchasing power of the Iraqi dinar, the inflation rate, and the building of a foreign cash reserve.

* Work to restore the confidence of citizens and customers in the Iraqi banking sector.

* Work to increase the percentage of savings for the cash mass in circulation in banks to the percentage of hoarding outside banks, where the percentage of savings in the banking sector does not exceed 20%, and the percentage of hoarding is up to 80%. Increasing the percentage of financial inclusion and the delivery of banking services to the widest spread of the geographical area at the level of governorates and districts aspects, and the increase in banking density in this direction.

* The need to complete the structural and technical foundations of proactive control.

* Activate and reconsider the development of work mechanisms in the Deposit Insurance Company.

 * Reconsidering the laws of the legislative environment that regulate banking work.

* Reviewing and evaluating the results of banks' business and re-classifying them by accredited international companies. And to identify weak banks that need the intervention of the Central Bank of Iraq to rehabilitate them, restore their activity and protect them from bankruptcy.

* Demanding government support in accordance with previous decisions and instructions issued by the Council of Ministers, the Economic Affairs Committee and the Ministerial Council for Economy.

* Strengthening and activating the central bank's lending and financing initiatives for small, medium, housing and large projects, in a way that contributes to stimulating the economy, revitalizing the economic cycle and diversifying the resources of the public budget.

* Developing the organizational, technical, and administrative structure of the Central Bank of Iraq and government and private banks, while emphasizing the principles of governance and determining the owners’ intervention in the banks’ executive departments.

Therefore, and for the purpose of applying the banking reform approach, according to what was stated in the strategy, according to an insight into the priorities and challenges that the Iraqi banking sector suffers from, the Central Bank made exceptional efforts during this year 2021, and many goals were achieved from the main and subsidiary goals, and it is trying to complete the achievement of all goals in 2023, which is the last year of the strategy.

Therefore, the strategy of the Central Bank has proven that it established, planned and identified advanced steps on the road to the systematic application of the desired banking reform.

* Economic and banking consultant

Replace damaged coins with new ones

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Paper currencies are exposed to damage quickly, especially those of small denominations, due to their frequent circulation and use by children in direct transactions between different shops and markets, in light of the weak education by the Central Bank to replace damaged currencies in the bank, which created an outlet for the weak-minded of Taking a percentage of the money in exchange for replacing the damaged ones with new ones, sometimes up to 50% of its value.

 

Citizen Ammar Basem says that “the shops and markets spread throughout Iraq do not accept dealing with damaged cash denominations, and they try as much as possible to get rid of them by returning them to the citizen or refusing to take them from him, even though it is a valid and non-false currency.”

Bassem added to “Al-Sabah” that the children who destroy the most small denomination paper currency are children, sometimes they put it in their mouths or tear it up, intentionally or unintentionally, especially if it is damaged from the ground up.

Ali al-Bahadli (the owner of markets) says, unknowingly, large numbers of small cash denominations (1000), (500) and (250) dinars accumulate in me, because I left my young son to run the shop during my absence, so the people take advantage of walking their damaged coins on my son, Which compels me to incur an unnecessary loss.”

Al-Bahadli added to Al-Sabah, “A person comes to me from time to time, who collects damaged currencies from the shops and directly replaces them with new ones, in return for a commission that sometimes reaches half its value.”

And he indicated that "this loss should be borne by me because of the culture of inadmissibility of citizens in trading, even though they are currencies officially issued by the Central Bank and are not counterfeit."

In this regard, the expert in economic affairs, Dr. Hussein Al-Khaqani, explained that “the Central Bank is the only authority that is able to issue and print currency notes according to the law.”

Al-Khaqani commented on the condition of the damaged banknotes and the reason for their non-acceptance or rejection by the public, saying: “The reason is due to the refusal of a number of banks to receive such currencies from merchants and shop owners. General refusal to deal with damaged currencies.

And Al-Khaqani stated that “the central bank should urge all banks to accept dealing in these currencies as they are official and not counterfeit, in addition to the fact that banks have the ability to sort out and isolate the damaged ones, and that their acceptance by banks means acceptance of trading in them among the public.” He pointed out that "the ideal solution to this problem is to impose (credit card) or (Visa and MasterCard) cards on shops, markets, filling stations and all parties that deal with cash, as it was imposed on retirees and employees." He stated that "the real application of banking automation realistically reduces the size of the cash block, and thus encourages the public to trade digital currencies when buying or selling, thus reducing their financial losses in small units."

Bank restructuring.. Measures to develop the financial sector

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Within the procedures of the reform program and the contents of the white paper, the Ministry of Finance decided to restructure the Rafidain Bank, amid praise for this step and calls for other banks and departments to be included in this step. According to the Ministry of Finance, the reform package consists of several axes, including: creating a new internal system for the bank that complies with the governance guide issued by the Central Bank of Iraq in which the board’s management is independent of the bank’s management, strengthening the independence of its work, supporting efforts to complete the application of the comprehensive banking system, as well as strengthening The bank's relationship with banking service providers and its regulation.

 

In a statement to Al-Sabah, the financial expert Thamer Al-Azzawi promised that the Ministry of Finance's move is "positive", and that it is on the right path to developing the financial and banking sector.

He pointed out that {Iraqi banking systems lag behind their counterparts in the world and adopt routine procedures that are boring and unattractive to the citizen}.

The package of measures also includes a review of the bank’s policies and making them more in line with the developments of the modern banking system to ensure the provision of the best and quality services by adopting a technical system to facilitate banking operations and carry out banking activities of economic feasibility in various sectors, in a manner that serves economic activity and guarantees the rights of depositors and owners interests.

Al-Azzawi added that "banks should update their systems, deal intelligently with the customer, reduce procedures while providing facilities, as well as review interest rates and other matters that attract customers."

 

advanced performance

And the Ministry of Finance announced the possibility of transferring the data of the bank’s customers whose salaries are settled with the bank and those who received advances and loans from the service provider to the comprehensive banking system. With regard to human resources, it was emphasized, in accordance with the reform package, the necessity of contracting with experts and specialists in the banking and financial sector to enhance the aspect of expertise aimed at raising the level of high-quality banking services, in line with the advanced performance of the banking sector worldwide.

The restructuring measures are part of the reforms designed to bring the government banking sector into line with the standards of governance of the Central Bank of Iraq. modern systems

Al-Azzawi called for "the introduction of modern technologies and systems to develop performance while raising the efficiency of workers in the context of keenness to provide the best competitive services, which tempts citizens who hoard their money outside banks, which may contribute to the recycling of billions of dinars." The white paper states: Rehabilitation of the banking system through the development of private banks, reform of government banks and the introduction and activation of the {basic banking system} in Rafidain and Rashid Banks and its activation, as well as accelerating the pace of development of electronic banking services.

Finance approves a package of procedures for Rafidain Bank

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Today, Friday, the Ministry of Finance approved a package of reform measures related to the restructuring of Rafidain Bank, according to the white paper

The ministry said in a statement, received by Alsumaria News, that "the reform package consists of several axes, including: creating a new internal system for the bank that complies with the governance guide issued by the Central Bank of Iraq, in which the board's management is independent of the bank's management, consolidating the independence of its work, and supporting efforts to complete the implementation of The comprehensive banking system, in addition to strengthening and regulating the bank’s relationship with banking service providers

The package of measures included, according to the statement, "reconsidering the bank's policies and procedures and making them more in line with the developments of the modern banking system in order to ensure the provision of the best and quality services by adopting a technical system to facilitate banking operations and carry out banking activities of economic feasibility in various sectors in a manner that serves economic activity and guarantees the rights of depositors and owners interests

The ministry indicated, "Supporting the possibility of transferring the data of the bank's customers whose salaries are localized with the bank and those who received advances and loans from the service provider to the comprehensive banking system

With regard to human resources, the reform package stressed the need to contract with experts and specialists in the banking and financial sector to enhance the aspect of expertise aimed at raising the level of high-quality banking services, in line with the advanced performance of the banking sector worldwide.

The restructuring procedures come, according to Al Bayat, "within the framework of reforms designed to bring the government banking sector into line with the standards of governance of the Central Bank of Iraq.