IMF Documents and the Float Theory

I was looking through some old posts tonight that I did back in 2014, and I came across this in the comments section.  

"14. The de facto fixed exchange rate has served Iraq well. The authorities agreed that a stable nominal exchange rate provides a valuable anchor for inflation expectations in an uncertain environment, and intend to continue implementing this policy for the foreseeable future. In the medium term, staff encouraged the authorities to consider creating the conditions which would make possible a move to a more flexible exchange rate policy. Such flexibility could allow a predictable and gradual appreciation of the nominal exchange rate, triggered by strong oil revenues and the Balassa-Samuelson effect, to accommodate a possible real exchange rate appreciation while keeping domestic inflation low."


https://www.imf.org/external/pubs/ft/scr/2013/cr13217.pdf


This report was issued in July of 2013, and I think it's where Kaperoni got his "it's a float" theory.  Notice that they didn't say anything about floating the dinar.  They just said that in the medium term Iraq should consider a more flexible exchange rate policy - not a different exchange rate regime (as in going to a free float) but a more flexible version of the current exchange rate regime.  As I have pointed out more than once, an appreciation of the nominal exchange rate (back then it was 1166:1) could mean that the denominator would increase.  In 2015 that's exactly what happened when the dinar went from 1166:1 to 1184:1.  Then in 2018 it increased again to 1190:1 which is the current exchange rate.  With each increase in the exchange rate the value dropped.  

In March of 2014 the IMF said:

“The exchange rate—supported by ample international reserves of the central bank—provides a key nominal anchor to the economy and has served Iraq well. We encouraged the Central Bank of Iraq to renew its efforts to liberalize gradually the foreign exchange market, further reducing the spread between the auction and parallel market rates."


https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr14124



The market rate around that time was well over 1200:1.  So for them to reduce the spread between the market rate and the auction rate (1166:1 at the time) they would have needed to move the denominator up, which again is what they did in 2015 when they moved it to 1184:1.  This move would have reduced the spread as the IMF had recommended.  

This is why I don't buy Kap's interpretation of the IMF articles.  The CBI's response to what the IMF has said is the opposite of what Kap says will happen.  They're LOWERING the value, not increasing it.  They're bringing the auction rate (or official rate) closer to the market rate.  That's why I've been saying for the last couple of years that they'll devalue down to 1200:1.  I could be wrong, but so far it's moving the direction that I predicted rather than the direction that Kap has predicted.

I sent Kaperoni the link to this thread....he sent me a reply via PM at Dinar Alert....I will post his reply below.....




"No thanks.  Sam does not understand what he is reading and can't even figure out appreciation from depreciation.  For example...the dinar only devalued once (not twice as Sam thinks in the last 5 years) to citizens (market rate) only when the IMF asked to reduce the value for reporting purposes as part of a Stand By Agreement to accelerate reforms/compliance.  Had technically nothing to do with the currency weakening as he thinks. lol  He is twisting meanings and words to fit his LOP theory for years, yet the two recent articles (one from CBI) and the other from parliament once again confirm the intentions to raise the value to reduce inflation (technically at this time there is less than 2% inflation in Iraq) so they are talking about the inflation that occurs as a result of capital that come with investment (referring to activating the economy) which can only occur via a float which is a tool used by the CBI to counter such pressure.  It has to be a float because the pressure from investment is not one time or a single event.  The pressure will be ongoing as investment/investors increase.  Feel sorry for Sam he is trying to help some with the guru nonsense but going overboard trying to debunk reality.  It would be better for him to read about transitions than to spout off his nonsense."

Kap



I wrote a report years ago on the IMF  documentation....



https://dinaralert.webs.com/apps/forums/topics/show/9429849-the-imf-the-cbi-and-the-transition-to-a-free-market-10-25-2013



From the IMF on how countries transition...



https://www.imf.org/external/pubs/ft/wp/2004/wp04126.pdf

https://www.imf.org/external/pubs/ft/issues/issues38/ei38.pdf

https://www.imf.org/external/pubs/ft/op/193/chap3.pdf

Anybody who has been around for a few years in the dinar world remembers when the rate went from 1166:1 to 1184:1 in 2015 and from 1184:1 to 1190:1 in 2018.  Kap is only hurting his own credibility by insisting that it only devalued once.

I think Kap believes that the dinar went to 1184 as result of IMF instructions.  The end result of that move was in essence 1190 because the CBI adds 6 dinar commissions.  Now the second move was never really a move, just the addition of the commission in the advertised price.  Therefore, no change in value.  Still 1190.  I don't think Kap really cares anymore anyway.  He has proven what will happen and many agree including me.  Don't know why you even comment on something that is pointless anyway.

Parliamentary Finance intends to develop mechanisms to maintain the stability of the dinar exchange rate




20-03-2019 08:06 AM 

Agency of the orbit - Baghdad

The member of the Finance Committee of Parliament Abdul Hadi al-Saadawi, on Wednesday, the intention of his committee to develop mechanisms to change the financial funds to raise the dinar exchange rate and maintain the stability of inflation.

"The committee will move during the current legislative term to change the fiscal and monetary policy in the country in general," Saadawi said in a statement exclusive to the newspaper / Al-Sabah and the official / Al-Madar said that "the committee is meeting with officials of the Central Bank to discuss this change during Next stage '.   

He added that 'the financial Parliament is keen  to enact the law of financial administration as it gives a complete road map of the financial policy in the country in terms of management of money and cash in the state', indicating that 'the change will raise the exchange rate of the Iraqi dinar against foreign currencies while maintaining the stability of inflation in the country '.  

"The Commission is determined to make these changes during the next phase and not to follow the traditional methods are not appropriate at the moment."

http://www.almadarnews.org/index.php?page=article&id=53258


https://www.dinardaily.net/t83407-parliamentary-finance-intends-to-develop-mechanisms-to-maintain-the-stability-of-the-dinar-exchange-rate

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