Dr. Abdul Razzaq Ibrahim Shabib – Al-Maarif University College – Department of Banking and Financial Sciences.
Abstract:
- The exchange rate policy in Iraq faces external variables; It is caused by the rise in the prices of foodstuffs and other commodities globally, which leads to an inflation of imported goods. It can only be addressed by improving the value of the Iraqi dinar according to the terms and foundations of trade exchange in the global market.
- The financial openness and liberalization policies followed in Iraq have achieved great success in the field of the financial and banking sector, and this has contributed to the exit of Iraq and its monetary authority from the provision of forced control to the regular supervision of the Arab Financial Action Organization.
- With the remarkable progress in financial and banking facilities and laws encouraging borrowing and trading in the stock market; However, the tolerant religious teachings, customs, and traditions prevent Muslims from dealing in usury, and hence the limited impact of these facilities on the economic reality.
- The tight performance of the stock market and its weakness, and the developments in its index do not reflect the nature of the transactions taking place within it, but rather as a result of fluctuations in the country’s economic conditions, even if they come at a belated rate.
- The behavior of investors in the Iraqi Stock Exchange is the behavior of memory, and this means that their interaction with the rise or decline in stock prices is tainted by caution, and a lack of direct interaction; For their fears of a repetition of similar events that occurred in the history of financial markets.
- The automation of financial transactions, including the use of smart applications, constitutes a catalyst for increasing cash circulation and financial movement in the financial markets and benefiting from individuals’ money in entering into financial movements.
Introduction:
The subject of financial liberalization is one of the topics that has taken place in the economic literature for a not long time ago. At the beginning of the second half of the twentieth century, in 1971, the United States of America abandoned the gold standard and collapsed the Bretton Woods system; It was noted that most of the countries that have tried to advance their economic situation, and their attempt to get rid of the permanent deficit in their balance of payments and to move the wheel of economic development have taken many directions in their policies such as liberalizing interest rates, exchange rates, expanding the activities of banks, establishing and developing financial markets, and it is called financial liberalization policies. These policies have a significant impact on the financial institutions operating in the entire economy. The removal or mitigation of restrictions will enable the parties involved in these institutions to obtain advantages and benefits that did not exist under the financial restraint policies, which are those measures and decisions that seek to restrict the financial system.
With the end of Uruguay’s talks on the International Trade Agreement and the emergence of the World Trade Organization, which adopted the issue of financial services and created the appropriate conditions for setting international rules and standards regulating countries’ policies towards capital movements, the banking sector, the opening and liberalization of financial markets, and the liberalization of banking services trade. The International Trade Agreement also specified the period 1996-2005 as a transitional stage for countries to join the World Trade Organization. Accordingly, the financial environment will be determined according to the nature of the relations imposed by the World Trade Organization within the rule it has set, and according to the criteria it has previously prepared.
The First Topic: The Policies of Financial Liberalization
Financial liberalization is the main objective of the modern financial system and its basic pillars (the International Monetary Fund, the International Bank for Reconstruction and Development, and the World Trade Organization). The policies of financial liberalization are closely related to the principles of capitalist thought aimed at limiting state interference in economic activity and the gradual transition from a planned economy to a market economy.
- The Concept of Financial Liberalization Policies
Economists define financial liberalization as every action that leads to the reduction of restrictions imposed on the financial system, and these restrictions relate to banks, stock markets, and other financial institutions and their instruments; To give it the impetus to contribute to economic growth. As for (E. Scheow, R. Mcckinnon) they initially dealt with the mechanism of liberalizing credit markets and the public sector, but with time, it became clear that their calls extended to the private sector facilities as well. They defined financial liberalization as an effective method; To accelerate the process of economic growth in developing countries by removing restrictions on the work of financial institutions (Al-Jameel, 2011: 35).
There are those who deal with the subject of financial liberalization in terms of the narrow and broad meaning. In the narrow sense, financial liberalization is intended as a set of measures that seek to reduce restrictions imposed on the private sector. In the broad sense, it refers to a set of measures that work to develop financial markets, apply an indirect system of monetary control, and establish a strong financial system capable of sustaining the financial liquidity of these institutions.
Whether it is in a narrow sense, or a broad one, the issue of financial liberalization, removing restrictions, and easing direct monetary control is related to a larger and more important issue, which is the independence of banks, giving them complete freedom in managing their financial activities, and abolishing all controls on the directed banking work.This includes taking many measures that are at the core of the banking system’s work, such as liberalizing interest rates and canceling their upper and lower limits that were prevalent in light of the financial restraint. Some countries resort to setting a price ceiling for interest rates that cannot be exceeded for the purpose of controlling the trends of the course of economic activity, as well as setting a certain price floor for the interest rate that cannot be lowered. It was not limited to this point, as in light of the policies of financial restraint, the state resorts to directing credit towards areas desired by it, whether by coercive direction or by literary indicative guidance, and this is by granting certain advantages to some banks to finance areas compatible with the directions of economic policy (Al-Jameel, 2012: 85).
