Press Release December 21, 2010
Tuesday, 15/1/1432 AH - approved 21/12/2010 (updated) 17:46 pm
Tuesday, 15/1/1432 AH - approved 21/12/2010 (updated) 17:46 pm
Economic issues
What is the point to delete zeros from the Iraqi
The cost of deletion of zeros
Consequences of deletion of zeros
2011 will see the deletion of three zeros from denominations of Iraqi currency, and it will equal the new Vdinar thousand dinars offline.
Some argue that this process will return Iraq to the economic period brightly and enhance the value of the dinar to the IMF and the international community and will deal with economic problems, particularly inflation.
In the opinion of others in the process of the loss estimated at one third the value of the currency.
Fbtkadirhm owners would be affected by the salary and wages because they have to enter their purchasing power is less than the nominal value of the currency.
They believe that the abolition of zeros will lead to a "monetary illusion".
These positions are based on fragile foundations, and sometimes illogical.
There is a clear mix between the abolition of zeros and the improvement of the real exchange rate, and mixing between the second such cancellation and inflation, and mixing between the third such cancellation and the devaluation of the currency.
The first position is just wishful thinking can not be achieved by deleting the zeros.
The second situation ambiguous, how to delete zeros lead to financial loss and on what basis one third identified
The deletion would not address the inflation will not contribute to the exacerbations.
Nothing to do with the illusion (illusion, or rather) the subject of critical research.
Seems that the central bank and some government parties tend to the first direction, after that add to the national emblems of achievement and economic reform and placement up with the GCC countries.
There is a clear mix between the abolition of zeros and the improvement of the real exchange rate, and mixing between the second such cancellation and inflation, and mixing between the third such cancellation and the devaluation of the currency
Appearance of zeros and delete
In the comprehensive and rigorous blockade against Iraq for the period between 1990 and 2003 showed a severe economic crisis strength of the collapse of oil exports and the deterioration of industrial and agricultural production and rising unemployment, inflation and non-payment of external debt and chronic deficit in the state budget.
It is intuitive that the exchange rate drops sharply, reaching par value of the dollar to 3000 dinars in 1995.
It has become necessary to issue new categories of cash, amounting to a nominal 250 dinars, but not equal in terms of real value only 25 fils coin from the seventies.
There were thus three numbers on the Iraqi currency.
The United States occupied Iraq in 2003, rushed to the cancellation and replacement of denominations.
In order to facilitate internal trade in the daily life has become necessary to add other numbers.
The deal is the currency of seven categories: 50 and 250 and 500 and 1000 and 10000 and 25000 dinars.
Unlike the Arab countries do not exist in Iraq since about 15 years old coins.
To raise the exchange rate there is, in principle, long and arduous road leading to positive economic results and the road to another quick and easy useless in economic terms.
The way the first indicators of monetary and financial, commercial and political.
Which is the size of cash reserves and the weight of external debt and the Centre for the trade balance and balance of payments and public budget, inflation rate and the level of investments and the size of agricultural and industrial production and the intervention of the monetary authorities and the security conditions and exchange rates of major currencies.
When comparing the year 2008 year 1995 we find an improvement in most of these indicators, the price of a barrel of oil from $ 17 in 1995 to $ 94 in 2008.
Iraq was under an international embargo from 1990 to 2003.
While the blockade was abolished after the occupation.
The outcome of these two factors of high oil revenues of $370 million in 1995 to 63,000 million dollars in 2008.
In this period, she moved the cash reserves of almost zero to $50 billion.
And never to the country to achieve such a size even before the war against Iran.
Therefore, improvement of the exchange rate from 3000 dinars to the dollar in 1995 to 1204 dinars to the dollar in 2008 to 1120 dinars to the dollar at the end of the year 2010.
But this improvement is not equivalent to the results of the indicators mentioned at all due to the destruction of infrastructure and the absence of economic policies and rampant corruption.
Exchange rate is still very far from the aspirations of Iraqis.
Hence, the idea to the other way is easier and faster, a deletion of three zeros from the dinar.
The paper is a class of 5000 dinars for example, which will be replaced by another paper, a nominal value of JD 5 new ones.
Then move the exchange rate between overnight from 1120.00 dinars to the dollar to 1.12 dinars to the dollar.
It is noted that the process of removing the zeros is known in several countries.
Sudan delete two zeros from its currency in 2007.
Bolivia and canceled three zeros off its currency in 2008.
Romania and removed four zeros from the currency in 2005.
Turkey and the removal of six zeroes from its currency in 2005.
Psychological factors
The reasons for the deletion of zeros is almost confined to the psychological aspect of the desirability of a currency with an exchange rate is high.
This enters the height of joy to the heart of Iraq.
The joy of the return of the dinar to the prosperous past.
But this joy does not conceal his conviction that the process of removing zeros would not address the economic crisis suffered by the private landing the standard of living, unemployment and the deterioration of the security services and health, education and energy services.
Indeed, the economic situation will not change when the dinar exchange rate of $ 0.8 (deleting three zeros) will not change even if the Iraqi dinar was equivalent to $ 8.
Because these values did not result from the offsetting economic data, as was the case for the seventies, but merely a formal decision.
It should be noted that the central bank abandoned the practice for a fixed exchange rate system to adopt the floatation.
Bank no longer intervene in the exchange rates became subject to the market, so do not cling to draw from the wisdom of the dinar per one dollar or any other price.
Not the wisdom of sticking to draw dinar per one dollar or any other price
Must work to convince the Iraqis that the currency's strength derived from the strength of the economy is not the number of units of foreign currency equivalents.
In Japan, there are banknotes of a ten thousand yen, or about one hundred dollars.
Can not find the Japanese utility to delete the two zeros from their currency until it reaches the exchange rate of yen to dollars.
The cost of deletion of zeros
Until the year 1990, the Iraqi dinar printed in Britain.
In the mid-year siege between 1990 and the first third of the 2003 printing of the dinar in Iraq by the rivers of the printing house, which was established in 1979 and of the Central Bank of Iraq.
After the occupation back to print again to Britain assumed Delaro company.
There are no official data on the cost of Iraqi banknotes.
But it is known that the overall rate for the cost of paper cash in Britain 7 U.S. cents.
Enough then to know the number of traded securities to give an idea of the total cost.
We did not find an official source in this regard, but a statement made by an official in the Iraqi Central Bank which he said that this number more than four trillion paper.
We appreciate there was an error in this statement or to move.
It seems that the correct number is four billion paper.
And thus become the cost of printing $ 289 million.
This amount is useless compared to the financial situation of millions of Iraqis and an import more than 300 thousand tons of rice.
May be appropriate to hold a referendum to see whether the Iraqis would prefer to spend this amount to delete the three zeroes from the dinar or monitored to improve the ration
The political importance of this referendum as well, he would appear at the same time the approval or refusal to enter the Iraqi Kurdish language to their currency.
Add to that the amount of last Stamping metal parts not to mention the funds needed to cope with the consequences of deletion of zeros as a replacement postage stamps and finance.
As the economic return for the replacement of the dinar is close to zero the process becomes heavy financial loss, especially now that the state budget deficit.
In the case of insistence on this replacement for one reason or another should be taking into account the following observations:
Development of local printing: The process of deleting the zeros of the loss is not only financial but also economic because of printing currency out of Iraq, which does not contribute to this process in the operation of the Iraqis, do not lead to increased value added of manufacturing industries.
On this basis, it must be the rehabilitation of the Dar Al-Nahrain printing came after the occupation by the organs of the theft and burning of documents.
This institution is currently printed checks and bank cards, passports and civil status.
And have experience in the edition No. 13 of the Iraqi dinar during the siege.
It must be supported to carry out functions of cash.
It should be noted that Arab countries like Morocco and Egypt are printing their currencies according to high standards.
Awareness: promote the use of bank checks and provide guidance information need to maintain the integrity of the banknotes and the introduction of electronic devices operating credit card to withdraw and deposit.
Feasibility Study: Photos of wasting public money printing or minting categories of cash and then found to be in circulation, which requires withdrawal from the market.
This is what actually happened in 2004 when he raised $ 25 coins, 50 and 100 dinars, and then withdrew in 2008.
The experiences of States to remove the zeros from the currency does not lead to tackle inflation
Consequences of deletion of zeros
Reduce the cash block: delete three zeros will lead to reducing the cash block (narrow sense) from 24.2 trillion dinars to 24.2 billion dinars.
This translates directly to the nominal values for the salaries and stock and bond prices.
Sense of poverty: delete the leading zeros to the feeling of poverty, it had a ten million dinars is now not only has ten thousand of them.
This feeling may lead to reduced consumption, which reflected negatively on the macroeconomic situation of the country.
But may not be exaggerating this effect, the Iraqis used primarily to delete the three zeroes in their dealings daily.
The sense of poverty, if any, is limited to a short period of time.
Inflation: The experiences of States to remove the zeros from the currency does not lead to a deal with inflation in Zimbabwe has been deleted three zeros from the Zimbabwe dollars (the name of the local currency) in 2006.
Inflation index did not fall, but prices are rising by 250% per hour (more than two percent per year) until the price of a loaf of bread million.
Note that this rise is not related to the deletion of zeros, but with data relating to economic supply and demand.
Prices rose again Vkthert zeros currency amounted to nominal values of banknotes trillions.
In 2008 the authorities have deleted ten zeros from the Zimbabwe dollar.
Did not reach this limit to be in Iraq by oil revenues, but the nature of the problem and one which is that the deletion of zeros does not address the inflation because it is not a cause but a result of it.
Even if we assume that the deletion of zeros reduces the severity of inflation is no longer useful for this deletion, because the Iraqi Central Bank data indicate that the rate of inflation has become only 3%.
If the deletion of zeros does not address the inflation it does not contribute to the rise.
The removal of three zeros assume the division of the nominal value of the new money by 1000 and at the same time be divided by this figure salaries, wages and other income and nominal values of shares and bonds as well as the prices of goods and services.
The rise in the prices of some goods or services when you move to the new currency, generating a popular feeling that the currency has led to it.
While research must be in supply and demand to explain this rise.
Did not increase real estate prices in Europe because of the euro, but because of the increasing demand for real estate in the period in which the back of the euro.
Monetary illusion: it is known in economic theory since the thirties of the last century.
It affects individuals who feel better financial situation is just to high salaries or wages if these incomes increase by 10% consumption rises.
But they will discover that the rise in incomes was only nominal, as the inflation rate (12% for example) led to a decline in real incomes.
You will limit their consumption to rebuild their savings.
A few months ago a lot of talk in Iraq, the emergence of money illusion in the case of deletion of zeros from the dinar.
In fact, it just is not relevant to monetary sense of the above remove the zeros, because it requires higher salaries by less than the rate of inflation.
When there is no relationship between nominal income and inflation is not correct to talk about the illusion of money.
The omission of zeros may lead to the opposite according to the worker a sense of poverty.
To any decline in consumption in the first stage and then consumption to return to normal status in the next phase.
In all cases, the psychological factors remain high and limited to a short time does not apply to all individuals with the same intensity.
The introduction of the Kurdish language: the replacement of the Iraqi currency a chance to enter the Kurdish language as well as Arabic and English.
Iraqi dinar currency will be the only Arab blog in three languages.
Will be based on to the second paragraph of Article IV of the Constitution which provides that the principle of equality requires the introduction of the Kurdish language to banknotes, passports and stamps.
This text is literally Moved on Article IX of the State Administration Law for the year 2004.
There is no similar provision in all his previous Iraqi constitutions.
Is the principle of equality is limited to banknotes or coins without that the Constitution did not succeed in selecting the appropriate term.
If the principle of equality requires the introduction of banknotes to the Kurdish why not also imperative to involve Turkish, Persian, Syriac, Mandaean and Yazidi and retina.
Why do not Christians object to the name of the currency movement, as stipulated in the southern Sudan peace deal signed with the government switched the name of the dinar to one pound, and this is what was actually in 2007.
Iraq's Arab Muslim country is not likely this mess.
The Kurdish language is not widespread at both the global and the Arab world, but it is understood by more than 85% of the Iraqi people.
Delete the zeros is not much different from adjusting the volume of banknotes or change colors or add a new fee or remove the image of
To the inevitability of the introduction of the Kurdish language to the first version of the coin after the entry into force of the new constitution must be to benefit from the experiences of other currencies.
For example, many folks euro currency in Europe, but where there are no any language but symbols, numbers, and photos only.
The conclusion that the deletion of zeros, not much different from adjusting the volume of banknotes or change colors or add a new fee or remove the image of them.
All of these operations do not lead to a worsening of the economic situation or to improve.
Replacing the paper reviews a class of 1000 dinars, and another sheet of class one dinar Kalastbdal from your candy weighing 1000 grams and another box of candy and the same weight of one kilogram.
Indications of rising inflation index, Iraq Call to delete the zeros of the Iraqi dinar
Strategy to raise the value of the Iraqi dinar
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