An Economic Expert: The Iraq Central Bank policy had weakened the local investment and the Ministry of Finance procedure was right

September 01, 2008

While the Expert welcomed the latest proposal by the Ministry of Finance that obliging to distribute the increases in the staff salaries into two shifts in order to reduce financial cash and reducing the constant demand by consumers on the local market.

Dr. Jamil Mohammed Jamil Al Dabagh clarified that indicators demonstrate that most Iraqi commercial banks deposite their funds in the Central Bank for the benefit of up to 18%, and this has limited the volume of investments in the country, and despite the low number of commercial banks but they should lend money to investors and traders with appropriate interest rates and allow the investors to renew the process of investing money in the same interest rates.

Al Dabagh pointed to the main criterion by which to measure the profitability of investing in any country in accordance to the term (marginal efficiency of capital invested).

Where according to this criterion; it is being compared with the prevailing interest rate in the market if the investment returns of industrial or agricultural or business were low (marginal efficiency) of invested capital to these areas (for example) around 10 - 15% and the rate of prevailing interest in the local market will hit 18% This investment can be considered uneconomical that any investor would prefer to put money in Fixed Deposit banks without the need for efforts and problems of investment.

Al Dabagh called to the importance of the central bank's policy accompany another package of measures to be consistent and coherent with other total economic policies to enable the International Bank to eliminate the inflation without complications such as investment policy, foreign trade and domestic tax policies and upon completion of all these policies determined by synchronizing with the policy of Central Bank will then bear its fruit at the level of general economy and eliminate the problem of inflation.

Al Dabagh also said that the Central Bank policy led to reduce the size of inflation in the country, during this year compared with previous years, however, Al Dabagh said the state directed towards raising the living standard of staff, and increased the rates of salaries and the promoting of job hierarchy have led to the growing consumer demand for various goods especially food, as a result of cash money of the staff and their economic recovery and then a slight rise in rates prevailing prices in the domestic market.

Al Dabagh clarified that proposal of the Finance Ministry to postpone the disbursement of salary increases for the next four months of this year to early next year was on target to reduce the cash money and reducing constant demand by consumers on the local market.(Source)AlSaba