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Policy Review: Central Bank Of IraqBy Alexander Nagniy For Iraq Money Company One of the strongest financial institutions in the post-war country is undoubtedly the Central bank of Iraq. And some not well-informed people may ask why. But the ones that have been watching the progress of the operation called “Iraqi Freedom” and know a little of the history of Iraq’s may give the right answer to the question why the introduction of the new Iraqi currency, Iraqi Dinar, exceeded the pessimistic expectations of some minority who unfortunately have mass media recourses to propagate their pessimistic views. It is important to confess that despite the so called upsurge in violence that drags the progress of stabilization of Iraq’s life back the conditions of the new Iraq Dinar is affected very little if at all. The introduction of the new currency was essential and the financiers of the Central Bank of Iraq realized that in 2003. Their decision was backed my two causes: economical and political. First the shortage of the national currency would push the country into the dependency from other world strong convertible currencies. And it used to be US Dollar mostly, because prices for oil are traditionally calculated in American currency and Iraq’s economy will be beginning its infrastructure reconstruction process depending on the selling of oil and natural gas. So the first step to fill in the growing shortage of money was a slight influx of dollars into the circulation in Iraq which didn’t mean the dollarizing of Iraq’s economy because the later the introduction of well the new Iraq’s currency filled the monetary needs of the economy. Dollar did its shifting function in preparation the financial ground for Iraq’s national currency in post war country and now people are getting their salaries and are making bank savings in the new Iraqi Dinar. The second and not less important reason was that the new currency has no Saddam Hussein’s picture on them. The monetary situation was deeply studied in Iraq peeping deeply into the pre-Saddam Iraq. The so called ‘Swiss’ Dinar that was in circulation before Saddam’s rule and still saved its circulation in the territories controlled by Kurds in the north of Iraq has the much higher stability and preference than the printed Saddam’s Dinar. And it is easy to notice the similarity of the new Iraq Dinar and the old ‘Swiss’ Iraq Dinar that is no longer in circulation. So the rate of exchange from Saddam’s printed Dinar and ‘Swiss’ Iraqi Dinar wasn’t equal. The rate of exchange from printed Dinar to the new Iraqi currency was one to one while the more stable and therefore preferable old ‘Swiss’ Dinar equal to 150 of new Dinars. That was a wise step of the Central bank of Iraq to show its policy as for sound regulation of financial shift from old easily counterfeited currency to new monetary unit that was much, much harder to counterfeit and to attract nation’s trust in the banking system. One of the important steps of Iraqi financiers was making the Central bank of Iraq an independent government institution. That means that while staying under government control it was the authority to regulate its activity without looking back to ask some supervisor. Therefore this branch of financial institution is not tainted by corruption. All that led to boost the demand for the Iraq Dinar above the other foreign currencies despite the significant difference in the rate of exchange. The sound monetary policy of the Central bank of Iraq led to increase in being backed by foreign cash and gold and therefore in earning the trust of the Iraqi nation. The stability of the new Iraqi Dinar positively influenced the employment sector that led to increase in wages and purchasing power. While the civil service is the largest employer in the Iraq the level of the salaries increase is significant because Saddam Hussein’s regime was giving the average monthly salary of 7,500 Dinars (about $3US) and now payments in the new Iraqi Dinar paycheck soared up to nearly 300,000 Dinars (about $200US). Of course the sensible financier and not only the representative with the economics degree but any other person understands that Iraq Dinar is weak at the moment. The current rate of exchange is about 1,400 Dinars to $1US but not long time ago, in 2002 the rate of exchange was 2000;1 and just before the operation ‘Iraqi Freedom’ started the rate of exchange was 3,500-4,000 for $1US. As we see now as the life in the country is gradually normalizing the Iraq Dinar does likewise: it got rid of the face of the idol on its face, gained more protection from counterfeit and improved the rate of exchange. The current situation in Iraq marked by the explosions is the proof that the country government policy as well as the financial and monetary policy of The Central Bank of Iraq are doing proper steps in developing free democratic society in the region. Written by Alexander Nagniy For Iraq Money Company Iraq Money Company uses: 
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