In an important step to support the economy through monetary reform, the Central Bank of Iraq plans to issue banknotes with larger values than the ones in circulation, a senior official says.
Mazhar Mohammed Saleh, economic adviser to the prime minister, says that the market needs large-value banknotes, because the dealing with large blocks of money in Iraq is very difficult, especially with cash transactions surpassing payment instruments, such as sukuk, cards and electronic payments, reports Saudi-based Al-Hayat.
He points out that issuing large-value banknotes is not related to monetary policy but to the payments system management.
He adds that this plan will reduce the amounts of money, especially large blocks that make up 90 per cent of the money supply in circulation.
The economic adviser explains that the issuance of these large-value banknotes is to put the same amount of monthly money supply in the market but with different categories and not increase the original amount.
He ruled out the potential for inflation because of the implementation of the project, pointing out that the CBI does not lend the government.
Saleh says, “Issuing large-value banknotes while lending the government will lead to price inflation.” He adds, “The country is suffering from a contraction in liquidity both in dinar in dollar, with the value of money supply less than 40 trillion dinars (about $31 billion).”