Enorrste Article quote: “Economic Adviser to the Prime Minister called on the appearance of Mohammed Saleh, to adjust the exchange rate by the central bank.”
As I see this Saleh is advocating…for the CBI to go ahead NOW and move to a floating currency. Once the official rate is the same as the street rate, then the demand for dollars becomes meaningless, right? If I have to pay a commission to someone to buy dollars when my dinars are going to go up and down just as the dollar does, why would I do that? I wouldn’t. Remember, what happens WITHIN a country is different than what is happening OUTSIDE the country. We know that with our own currency: it goes up and down outside the country, but is still “just a dollar” at home. The same will happen with the dinar: it will be “just a dinar” and no “difference” inside the country between it and a dollar will matter. Once the incentive to buy dollars is removed by changing the exchange rate regime, then the fire to abandon dinars in favor of dollars will go out. At that point, market forces will come into play and the dinar will rise in value…once it is set free natural market forces will show that it is actually STRONGER than the dollar. This won’t take long, either, because if they change the exchange rate regime then that means that OTHER people besides locals will have access to the currency. This includes speculators.
Therefore, I see this as a bold move on Saleh’s part. I also see that it may be at the prodding of Abadi or at least with his consent. Remember, Saleh works for Abadi. He won’t open his mouth unless he has cleared his views first with his boss. This, then, is an internal discussion between Saleh and Abadi, on the one hand, and Allaq, the head of the CBI, on the other. It is, in essence, a statement from Abadi to Allaq telling him that, in his view, it is time to move forward with the change in the exchange rate regime. It would not surprise me if the change in the exchange rate regime occurred simultaneously with the issuance of the 50000 dinar notes. Now, the CBI is still autonomous, so we don’t know if they will take the bait or not. Therefore, it is possible that nothing will come of this: we have seen this before, many times. Of course I could be wrong, but I just can’t believe that Saleh would recommend to anyone that the official rate be reduced. Hang in there. If Saleh’s recommendation today comes to fruition we may actually begin to see movement in the right direction, finally.