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Saturday, December 26, 2015

Enorrste Thoughts on CBI Article, 26 DEC

Enorrste Thoughts on CBI Article

To / all licensed banks and licensed money transfer all companies and financial investment companies and broker the buying and selling of foreign currencies approved all companies (foreign exchange rate)

12/20/2015     http://cbi.iq/documents/Announceme-20-12-2015.pdf
 
Enorrste     I'll take a stab at this one. The reduction itself is quite mild. In fact, it is so mild that it is unlikely that it will have an appreciable effect on the revenues of the GOI, as it claims it will.
 
At the same time, the article states that it is attempting to get in line with "international standards" while not explaining what those are or even if they will "be completed." This may be a hint as to the import of this move.

addition, however, they say that their reserves are already down to 60 billion dollars, a significant drop by any standard.
 
So, what do we make of this? It seems to me that the CBI is moving in this direction primarily to stall the drop in their reserves, irrespective of any "international standards" that they reference.
 
In that sense, this is a good move for the short term. The article also stated that it would give them "6 months" of time. I don't think that that means that they will run out of reserves in 6 months. Instead, it is more likely that they are buying some time to implement the IMF agreement to move to a float.
 
I therefore conclude that we will see a movement to a new exchange rate regime within 6 months and that this "tweeking" of the rate is an assurance that their financial position will be secure through that time period.
 
Once the float begins the rate will rise. We've discussed this numerous times. Furthermore, it is clear that this is not a "panic" move on the part of the CBI. In fact, Saleh stated that it is NOT a devaluation but is instead only an ADJUSTMENT.
 
I have no reason to doubt that statement. It is consistent with the small size of the change and with the statement implied that they are buying time (6 months) to get in line with "international standards."
 
Remember, it was the IMF that stated that Iraq would move into the "world market" at the beginning of the new year, or shortly thereafter. In my view, the phrase "world market" and "International standards" are synonomous.    I hope I am correct.  Enorrste

To / all licensed banks and licensed money transfer all companies and financial investment companies and broker the buying and selling of foreign currencies approved all companies (foreign exchange rate)
 
12/20/2015     http://cbi.iq/documents/Announceme-20-12-2015.pdf
 
From our translator...
 
To all licensed banks
To all Licensed remittance companies
Financial investment companies
To all the sale and purchase of foreign currency licensed Brokering companies
Foreign currency exchange rate
 
Best regards from the CBI
 
We would like to inform you that the exchange rate by international standards is still under study and we will inform you about the results as soon as we done knowing that was changing the base rate of the US dollar against the Iraqi dinar before this to 1182 Dinners per dollar .

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