Economics: economic expert Jamil Al Skinner (morning):

Thursday, August 28, 2008


.. Central weaker domestic investment .. The action was correct financial
BAGHDAD - Haider Al-Rubaie Fleih
Expert stressed that the economic policy of the Central Bank weakened the volume of domestic investment in Iraq after the lifting of the interest rate paid by most traders and farmers to invest their money through commercial banks away from the worries of trade, industry, agriculture and other investments that could push forward the wheel of the local economy significantly.

With expert welcomed the latest proposal by the Ministry of Finance last Judge distribute increases in the salaries of staff at two meals in order to reduce financial liquidity and reducing demand constant and severe by consumers on the local market.

He said Dr. Jamil Mohammed Jamil Skinner indicators demonstrate that most commercial banks based Iraqi funds deposited in the Central Bank for the benefit of up to 18%, and this has limited the volume of investments in the country, and should have been on the commercial banks despite the low number to send money to lend to investors The traders and interest rates appropriate for investors and allow the renewal of investing this money in the same interest rates.

Skinner pointed to the presence of President criterion by which to measure the profitability of investing in any country in accordance with the term (marginal efficiency of capital invested).

Where according to this criterion compared with the interest rate prevailing in the market if the investment returns of industrial or agricultural or business that is low (marginal efficiency) of invested capital to these areas (for example) around 10 - 15% and the rate of interest prevailing 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 hardship and the problems of investment.

He called Skinner to the importance that the central bank's policy accompany another package of measures to be consistent and coherent macroeconomic policies with other empowerment through the World Bank elimination of 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 Central Bank will then bear fruit at the level of macro-economy in general and eliminate the problem of inflation.

Skinner also said that the policy of the Central Bank for example, led to risk reduction and the size of inflation in the country, during this year compared with previous years, however, Skinner said the state directed towards raising the standard of living for staff and increased rates of salaries and the lifting of hierarchy have led to growing consumer demand for various goods Especially food, including a result of high liquidity of the staff and their economic recovery and then a slight rise in rates prevailing prices in the domestic market.

Skinner and between that proposal and 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 financial liquidity and reducing demand constant and severe by consumers on the local market.

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This statement seems interesting, but I have no idea what it means????? Any help here???

Near as I can figure, Mr. Skinner is saying the high intrest rate the bank is paying on deposits is slowing down the investments in new business and construction because they have a return of 3 to 8% less than a deposit account.