Evaluation of the Adequacy of Foreign Reserves - A Case Study in the Central Bank Of Iraq

Abstract

This research aims to study the adequacy of foreign reserves maintained by the Central Bank of Iraq through five important criteria: (Standard foreign reserves to money supply (M2), foreign reserves to monthly imports, foreign reserves to balance of payments deficit (surplus), foreign reserves to total external debt, foreign reserves to total foreign investments) and comparing them with the standard ratios approved by the International Monetary Fund, as well as testing its ability to meet the State's financial obligations. To achieve the objectives of the research, the Central Bank of Iraq was used as case study approach with quarterly values for the period from (2016) until the third quarter of the year (2021), as well as defining one main hypothesis that “the Central Bank of Iraq owns foreign reserves that help it meet the financial obligations of the State”. The research reached a set of results; the most important of which is that the Central Bank of Iraq achieved clear adequacy in facing the financial obligations of the State, through achieving studied indicators values that are significantly higher than the approved standard ratios.