Iraq News Study: Raise zeros from the Iraqi currency, Part I and II

Raise zeros from the Iraqi currency … between the robbery and yes / c 1 and 2 studies

PART 1:
Raised the proposal to delete the zeros of the Iraqi currency, which was adopted by the CBI, a sensation with government agencies and economic development in Iraq regarding the extent of its implementation, and Alatharwalanekasat currency on the current Iraq under the circumstances faced by the Iraqi economy, in time, who raised the subject of deletion of zeros from the Iraqi currency sensation between the pros and cons about what can be consequent effects in the economic sector, especially the volume of currency in circulation in the Iraqi market estimated at up to 30 trillion dinars.

Where he sees specialists in economic affairs that in the implementation of this proposal serious consequences begin to appear on the market that will occur upon changes in hit and suffer the consumer is the biggest loser of this process, especially if the implementation of the resolution in a sudden and rapid, and this does not mean the absence of optimistic this project and require the Iraqi Central Bank to adopt the implementation of this proposal is progressive and in turn so as not to be the effects of this decision serious consequences on the market and the consumer, and warned of the consequences of the implementation of the proposed rapid and sudden, as well as the proposal to delete the zeros of the Iraqi currency if it is implemented in a sudden and quick decision will have serious implications for the consumer.

And about the views of opposition to the project to delete the zeros proclaimed defenders that the opponents of the resolution providing justification is unacceptable objectively, by some definitions, one of the axioms of monetary theory, which put in front of senior professors of theory of monetary policy-makers the central bank, such as: that the central bank aimed at the events (they cash) of the public and Sestdrj emotional feelings about the sense of the improved value of the dinar nominal not real, and the right that it is not this argument a large merit by virtue of the availability of scientific expertise and practical cadre developed in the central and this according to the views of advocates for the project raise zeros, In addition, the Proponents argue that raising the zeros will create psychological effect to the citizen through the strengthening of its currency and adopted more widely, rather than foreign currency, which is demand for them as it is the value of the high and the ease in pregnancy and the difficulty of counterfeiting. Not to mention that the process of lifting of the zeroes will contribute to raise the value of the currency and reduce the rate of demand for hard currency, which is characterized by force and will lead to re-balance between the value of local and foreign currency and give it market power at home and abroad.

While oppose the process of lifting of the zeroes believe that the dinar will lose its value and depend on the price index in the local market.

Revealing that through the gradual rise of prices would lead to high rates of inflation, so that the bank has to raise zeros will increase prices and rising inflation rate and we have to repeat the same process again.

Therefore Opponents believe the postponement of this process at the moment because it will create confusion in the Iraqi market and will cost the Central Bank of huge amounts of money through the process of drawing, printing, replacement, especially the amount of currency in circulation in the Iraqi market is currently estimated at up to 30 trillion dinars compared to what it was the amount of currency on our web site in 2004 and which $ 4 trillion dinars.

Noting that the approach to support market stability and the national currency will be better and more effective than replacing them with new value and other currency.

This has begun to Iraq is witnessing a great and inflation gradually since the outbreak of war with Iran in the early eighties of the last century and the subsequent siege and invasion and zeros have been added as a kind of control on the Iraqi market has led to a doubling of the cash block several times.

Ilhoud so that there is a split among economists between opposition and supporters of the deletion of the Iraqi national currency Alasfreetn.

And we will try to identify by searching for these divergent views , with the adoption of the view that the process of lifting the zeros need to tan and the development of initial test results before proceeding with implementation, and there is a simple example, we can test the market, a process of converting balances mobile phones from the dollar to the Iraqi dinar ..

Here we find that the negative effects caused to a particular category are the agents of foreign companies, while the conversion and to deal in dinars and became a confusion in the discharge process the existence of small currency.

Not to mention the increase zeros are not night and overnight but started since the beginning of the nineties of the last century means that we are dealing, up zeros currency Twenty years ago, and it must be the change gradually rather than abruptly so as not to affect the value of the new currency to be deducted in the local market ” .

Aim:
By identifying the views of specialists in the economic affairs of Iraq, determine the pros and cons of the proposal to delete the zeros from the currency value of the Iraqi National

Research problem:
Ambiguity effects and implications on the value of the national currency of Iraq, and the price of foreign exchange under the variation and differences in the economic views.

Hypothesis:
Inflation in the Iraqi economy in the levels of non-disturbing, than for Aidawa to implement the proposal to delete the zeros, which may cause the increase of demand for goods and services in light of the emergence of the phenomenon of monetary illusion.

First research
Monetary policy in the face of inflation
Is the monetary policy pursued by the Central Bank of Iraq after 2004′s admired by those interested in economic affairs of Iraq, which contributed to this policy in stabilizing the national currency, which was reflected in the stability of the overall level of prices and low inflation rate of around 50% to 3%, according to statistics from the World Bank Central, and the attic in this section we will discuss the origins and evolution of the national currency and the Iraqi Central Bank and its policy in the face of inflation.

The first requirement: the origins and evolution of the Iraqi currency

The national currency is the Iraqi dinar has been the issuance of such national currency for the first time in 1931, the Dinar was at the time equal to (7.32382) of a gram of gold according to the law of the version in the year 1931, and in this period and the period of the previous Iraq was under British control. And the rest of the year 1947, stressing that a state of dependency cash for England, The value of the dinar foreign vary according to the change in value of the pound sterling and regardless of the circumstances and economic conditions and the local cash in Iraq, the most important reasons for this dependency due to political reasons and other economic The first is the subordination of Iraq to control the British colonial and the second in severe economic and trade ties between the two 0 (1).

In 1959 a new law of the national currency of Iraq, which became under which the dinar currency and monetary union background of the Republic of Iraq (2) , equal in value (2.48828) of a gram of pure gold, and this represents progress in breaking the cycle of dependency monetary shift “important and essential to build a monetary system independent Iraqi for international currencies and continued monetary system and banking development in Iraq, that started the Iraqi currency to decline with the wars waged by the political system in Iraq, not to mention the economic blockade as it reached the dollar equivalent of three thousands of dinars, and to higher levels when approaching strike coalition military dictatorship, which ended a 0 and it began a new phase of Iraqi currency, which went through several changes in its history, most recently in 2004 when the former Governing Council replaced the previous currency, which was a symbol of the former regime.

To put on new laws to the Bank’s work in light of an independent body and mind emerged as the role of the Iraqi Central Bank through Aalajraouat effective and affecting market liquidity (cash basis), namely: -

1 – Auction of foreign currency and where to buy or sell the Iraqi Central Bank of the dollar or to the market in the light of its political objectives.

2 – a list of the legal reserve requirements and the banks are in the possession according to customer deposits and any differential levels of deposits with the Central Bank of Iraq, cash in the safes and securities of the Ministry of Finance.

3 – facilities exposure of banks that have balances of reserve accounts in the Central Bank of Iraq, but not sufficient to settle the obligations at the end of banking day.

Hence monetary policy has an important role in maintaining the value of the Iraqi currency
It may be useful to point out here that what determines the value of the currency is linked to development of the economy as a whole state of scales external deficit or surplus is one of the most important factors as the existence of the old man in the external balances help to lower the value of the currency by increasing the demand for foreign exchange in order to fill the shortfall and obligations and which are in foreign currency this process, “any increase in demand for foreign exchange” is that directly affect the valuation and economic status.

Bamahsalp by the currency to strengthen it depends on a combination of factors are in the end, the strengthening and development of the economy and its sectors.

Therefore, the zeroes would not be a play to save as much as address the currency in cash.

The currency has two values ​​value of internal and external value and either foreign currency is the Iraqi dinar exchange rate against foreign currencies, we are currently witnessing the exchange rate stability and a clear value (1170) dinars to the dollar and this stability works to promote investment opportunities and facilitate and strengthen the planning for the future and makes the citizen Mtmona will be busy of any fluctuations in the exchange rate unlike the years before the year 2003, which was changing the exchange rate five times during the day (1)

But now price of exchange is stable and this is the success of monetary policy in place to bank in the stability of the external value of the Iraqi dinar either at the level of the value of Interior of the dinar is difficult to separate the values ​​of internal and external of the dinar, but the goal is to address the overall level of prices, and this level Homwhrat inflation in the Iraqi economy is to be adopted by the World Bank Central is the basis because the index of consumer prices Deleted Menna fuel prices and some food Kalkhaddr.

Hence, the bank economist praises Iraqi and policies that have contributed to the stability of the value of the Iraqi currency, the country is enough political problems and security, to the stability of the currency, which contributed to maintain the general level of prices in the consequent social stability, which contributes to economic stability.

PART 2:
CBI, with headquarters in Baghdad, has four branches in Basra and Sulaymaniyah, Irbil and Mosul, and founded the bank independent Iraqi under the law of the Central Bank of Iraq issued on the sixth of March 2004, and is responsible for the maintenance of price stability and the implementation of monetary policy, including exchange rate policies and management foreign reserves and the issuance of currency management, as well as to regulate the banking sector.

I have used the central policies were effective, especially in controlling the exchange rate as an instrument of cash to curb the growth rates of inflation and therefore Amataatp to fuel expectations that lead to stagger trading and markets, to add the central achievement Ahlalia new, as it resolved a foster stability Bthalutha known (improved value of the dinar after stability – improved exchange rate After stability – curb growth rates in the general level of prices, I had the opportunity) would replace an incubator speculative inflationary and solve automatically the real investment for investment financial speculator.

And so will be well-deserved change the management system of currency and payment system mechanism for quiet smooth objective wary speculators and fit any harmony with the trends of economic and even political The new Constitution approved by the requirements of market economy and the independence of the Central which was to be Tgierssayas not for a quirk of fate that happen was born a golden opportunity.

So the function of the bank’s primary in this economic phase critical of the local currency and value, here focused on two axes in this regard, one relating to exchange-rate system is adopted, and the second is linked to the decision to raise zeros of the three to be done in the future.

It is here and half the substantive to say, that the Central was able to to a large extent selection of the drainage system properly, through which he could maintain the stability of the value of local currency against the U.S. dollar, and through the use of daily currency auction, under which come down the Central Bank as a buyer of the dinar against the pumping dollars into the market, and improve the Iraqi dinar gradually and consistently, and guaranteed strength of the Iraqi dinar and the jettisoning him from the specter of oscillations, which were confronting the Iraqi dinar, which was reflected by the 2003 on the fluctuation of the economy as a whole, here are certain that the Central has succeeded in exchange rate policy that Throughout the years, and even the time of the global financial crisis and the resulting decline in oil prices, staple funded by dollars the central bank, it is through those dollars, the bank composition of its reserves of foreign amounting to more than $ 21 billion, and that worked very clear in the promotion and strengthening the position of the bank to maintain the value of the Iraqi currency, hence the central bank’s task is not easy and that under a range of determinants such as management of an oil economy in a state that turned into a free market economy and emerging from the womb of the worst political crises and internal security.

So the proposal was made by the Ministry of Finance to the Central Bank to raise three zeroes from the Iraqi dinar, which has been approved by the Central Bank, where he spoke last for the long term strategy aimed at improving the situation of the Iraqi currency by deleting three zeros of them, and the strengthening of systems of payments Consistent with the economic development happening in the country.

As explained Advisor to the Governor of the Central Bank the appearance of Mohammed Saleh said that “zeros formed a cluster of up to four trillion paper money, the financial value of 27 trillion dinars, after that was 25 billion dinars in 1980.”

In the meantime, wants the central bank through its policies in the daily currency auction stabilizing the exchange rate of the Iraqi dinar against other currencies as there were policies that the independence of central banks is one of the most important issues in the framework of research on the institutional framework which will help monetary policy to keep inflation rates at levels Almtdnipvi medium-and long-term means of independence here, freedom of the central bank in formulating and implementing monetary policy, without subjection to the considerations or political intervention does not mean independence by no means total separation between the central bank and the government and the private bank in determining the ultimate objectives of monetary policy where they can agree on these objectives between the Bank and the government Therefore, the bank looking for autonomy in determining the intermediate goals and in adopting the appropriate tools to achieve those goals with the need to maintain the greatest possible degree of harmony between monetary and fiscal policy ..

And actually enable the central bank in this way that preserves to a large extent to make the increase in the price growth to be normal until almost 5% here, we can say that the central bank Astmat to maintain the stock of currency Alajunbp has and everyone knows happened kind of pressure the government to finance some oil contracts and the central bank has rejected several other measures have helped to stabilize the exchange rate.

Indeed the monetary policy of central bank policy has been prudent over the past years, or after the change from 2003 to now, which is empowered veteran was able to fight inflation and this is the most important duties of central banks in the world and especially in Iraq and that inflation inherited from the previous regime where the Bank used policy tools Cash to curb inflation by raising interest rates, reaching this interest to 20% on time sucking up liquidity and worked at the same time banks to grant loans in the period the situation was serious and so does not help the business to borrow because of the deteriorating security situation, but now reflected policy to stabilize the security situation and the elimination of inflation, after the hard-line policy expansion has now cut interest rates to 4% for the central bank and this is one of the important factors which helped to stabilize the dinar in the Borders (1170) dinars to the dollar which is the point of convergence which draw or even the nominal exchange rate with the real exchange rate.

Accordingly, there is a relationship linking the value of the currency with the general level of prices, which is expressed in inflation, which addressed the core of the monetary policy of the Central Bank.

Third requirement

The central bank and monetary policy in the face of inflation:

Left the price trends experienced by the Iraqi economy since the beginning of the nineties of the last century and until 2006 the average annual inflation amounted to approximately 50% to reflect there is a structural problem has become inherent in the components of the entrances to the economy overall in Iraq, which has also continued to suffer from the phenomenon of imbalance between the sectors of commodity production ( with the exception of the oil sector now) and the distribution and service sectors that are still working for the service activities of marginal or low productivity.

Inflation and adverse effects on many aspects of economic and social development as it leads to lower standard of living for individuals especially those with limited income and to encourage speculative fixed assets and direct investments towards activities with high priorities and reduce the surplus or deficits in balance of payments.

For the purpose of addressing these effects and develop appropriate solutions to be standing on the causes of this phenomenon.

And diagnosis of the reasons is in itself and it was a way to cope with inflation, the current is achieved through one of the constants derived from maximizing the purchasing power of the Iraqi dinar through a basket of oil revenues instead of Tautness to the current economic situation.

And achieve economic stability desired must be done via component and a single stable and equivalent to the value of the Iraqi dinar in the cemented and building the value of monetary unit of Iraq over the foreign currency.

As experience has shown exercised by monetary policy in the past few years in the use of means to achieve the stability that came to its success through a number of forms of auctions held by the Central Bank of Iraq is the circulation of various financial assets to control the levels of liquidity and achieve stability and reduce inflation.

However, the auction of foreign currency, which comes on top of that auction, it is alone, has the efficiency and ability to absorb the cash block exported at a rate of one and a half during one year without affecting the international reserves of Iraq, which means that there is a strong control on the growth of cash flows and ease inflationary pressures through the activities of the exchange market and the central role in inflation targeting.

- Inflation today arrived in less than 3% and this is a good sign for the Iraqi economy for the past when he was in previous years reached 34% and that Iraq today for the first time up to place the decimal one This is a success, where he and three decades after Iraq was living in a hyper-inflation and this, of course case lends stability to the internal value of the Iraqi dinar as the main objective of monetary policy is to maintain internal and external value of the Iraqi dinar.

And dealing with inflation from the core goals by strengthening the Iraqi dinar exchange rate, after taking into account the fact that inflation and persistence in the long-term (regardless of its origins and causes in the short term, particularly vibrations sector supply source at the end of growth and expansion of the cluster of cash and low inflation are not taken only by adjusting monetary phenomenon and the stability of rates of monetary growth so as to achieve economic stability which is the responsibility of the monetary policy also says Mmeltn Friedman. not to mention that there are habits of savings and Aktnazip a variety of wealth comes in the forefront of the high level of hedging foreign currency, something which has reinforced the phenomenon of dollarization in various directions.

Faced with this situation has to be the policies of transformation of nature unstable demand for money through the hedge of individuals in foreign currency, to trust in Iraqi currency, which is intended to be of high value by raising the value gradually, and delete the zeroes in the future. after the improvement of the level of the Iraqi economy and becomes at least provide part of the effective demand in the Iraqi market.

Eight inflation targeting by targeting the exchange rate, even when part of the program is announced for monetary policy means that the installed nominal currently approved within the monetary framework adopted by the Central Bank, which provided the variables or intermediate targets will change from one level to another level and will have an impact both ways: the first is that expectations rationality to the public will be affected immediately by the increasing degree of replacement of the dinar to the dollar, so as to avoid any potential loss of fatalism and the other, the exchange rate regime will be more flexible system than it is now and will work towards the gradual rise in the interest of the Iraqi dinar.

Thus, the monetary policy in Iraq at the crossroads strong influence on the levels of liquidity and this means adopted by the central bank is entering a seller of bonds in the money market within the financial sector in order to control those levels of liquid and Mnasebha in addressing the phenomenon of inflationary monetary.

To the view that monetary policy makers in the country that “the Bank has succeeded in continuing its plans for the development of the Iraqi dinar with the value of foreign currency which was the top local and regional market.”

Stating that “the monetary value of the Iraqi dinar rose thanks to the plans and actions taken by the central bank continued to edit the Monetary Iraqi financial restrictions routine and administrative.” expressing the hope that “the percentage of stability in the value of the Iraqi dinar to the descent the world as well as to neighboring countries that have survived in the stability of its currency national investments and to bring it. “

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