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Reducing the Iraqi dinar exchange rate - determinants and alternatives -

rocky
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Post by rocky on Sat 14 Mar 2020, 11:22 am

Reducing the Iraqi dinar exchange rate - determinants and alternatives -
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 March 12, 2020
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» Reducing the Iraqi dinar exchange rate - determinants and alternatives -
( A study by Mr. Ali Mohsen Ismail, Governor of the Central Bank of Iraq ) ... To see it, [You must be registered and logged in to see this link.]



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weslin3
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dinar - Reducing the Iraqi dinar exchange rate - determinants and alternatives - Empty Re: Reducing the Iraqi dinar exchange rate - determinants and alternatives -

Post by weslin3 on Sat 14 Mar 2020, 12:11 pm

If you they float??? unpeg, maybe they have to devalue as a tool to float.. I haven't a clue what they have to do.. But hopefully they will get something started.
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Post by Proven on Sat 14 Mar 2020, 7:41 pm

Translated report summary from the CBI:

Conclusions:
1 - The devaluation of the Iraqi dinar at the present time does not seem an urgent necessity for the reasons
The following:
a-
The reserve position of foreign currencies is highly adequate in accordance with the standards
International, at more than 30% of GDP, as the surplus is in
Achieve a surplus with the adjusted current account
3
4
5% of GDP
2019, and expected to continue in 2020 and beyond.
B- The monetary and fiscal policies are unable to take adequate measures to curb
Inflationary pressures resulting from the devaluation of the local currency exchange rate due to lack
The effectiveness of the two policy tools for political, economic and financial reasons causes the state of disorder
Security, political, social, and economic stability due to the nature of market behavior
Financial, banking and private sector.
A- The decision to reduce the value of the national currency in unstable circumstances has an effect
Double negativity and creates expectations for further depreciation, confusing market conditions and an increase
Demand for foreign currency with weak confidence in the national currency.
2- The devaluation of the local currency leads to inflationary pressures, which most citizens bear
Its negative effects as a result of reducing the purchasing power of citizens and this is confirmed by two aspects:
The first: The majority of citizens depend on receiving their salaries and wages from the government.
A devaluation would be a tax deducted from their income)
Inflation (unless the government increases salaries and wages to counter inflation, i.e.
Compensate them for the amount of decrease in their purchasing power, and then they are
The government has allocated a large percentage of its exchange rate difference
To compensate employees and retirees, especially since salaries and wages have been exceeded
Currently (60) trillion dinars.
Second, citizens who receive support through the governmental protection network are affected:
Because of their reduced purchasing power, unless the government increases support
The result is as shown in the previous point.
 This increases the inflationary pressures and the significant negative impact on the purchasing power
For citizens, Iraq relies on imports to cover most of its consumption needs.
(12-11)
3- The reasons for heading towards reducing the Iraqi dinar exchange rate from the government or
Parliament from trying to cover the state budget deficit because of poor control over
Failure to maximize non-oil revenue, an option they find easy to overhead or otherwise,
At a time when imbalances and poor financial discipline should be addressed and the budget rebuilt
Of the state in the context of macroeconomic requirements and in light of the requirements of financial policy
And monetary policy, and in light of the wide opportunities available to maximize state revenues)
Other than oil (and in light of the necessities of reviewing the structure of the institutions of the state
Serious flabby and corruption
4- Countries often resort to devaluing their currency to improve their trade balance (increase)
Exports and reducing imports), but in the case of Iraq, the origin of invitations to
Currency devaluation is based on bridging the public budget deficit due to increased (unproductive) expenditures,
However, the goal is to improve the Iraqi trade balance if it is targeted) and it is required
Effective), and reducing the dinar exchange rate does not achieve this goal at the required level where:
الحقيقي The real sector (industrial and agricultural in particular) is at its lowest levels, and a percentage
Its contribution to the gross domestic product does not exceed 5%, and that of Iraq exports (other than
Very limited and does not constitute any percentage in the trade balance, and the advancement of the two oil sectors
Industrial and agricultural will take many years with effective plans and policies
Usually, the local currency is devalued in countries with high export potential.
الجمركية Customs policy is currently ineffective and is the first line of defense
The basis for protecting domestic product is to stimulate production
.

 The chaos of imports, loss of control and control over border crossings and size
Counterfeiting, corruption and smuggling cause the Iraqi market to be tolerated and flooded with goods
Cheap measures that inhibit attempts to upgrade domestic production, should be resorted to before
The option to reduce the value of the dinar is to correct these conditions in a way that ensures the application of customs laws
Local product protection, anti-dumping, and consumer protection.
5 - As the objective of the reduction realistically aims to improve the financial position
To the government, filling the public budget deficit due to the continuous escalation of budget expenditures,
Before resorting to the option of reducing the value of the dinar, other solutions should be exhausted, and they have been identified
In numerical analysis, he also went through that the reduction does not achieve the goal of bridging the budget deficit
Only to a very small extent is it available compared to the numerous negative impacts that have been demonstrated
And at a much greater value than can be obtained from currency depreciation, as are other solutions
Corrective, structural, and financially sustainable
It achieves positive effects
Economic, financial and social, to name a few, we refer to some aspects
(12-12)
Waste of state resources, which if placed in the proper framework and within the framework of efficiency
And economic, it is achieving a great boom in public financial conditions.
 Oil refineries and the Ministry of Electricity (Electricity Production) are used up to
Million barrels of oil, its market value (in the global market) and more than 20 billion
Decreases
ً
$ 1 (equivalent to 23 trillion dinars), while the government treasury receives revenue
About 10% of the mentioned amount! .
قيمة The value of annual imports is about $ 50 billion, revenue is estimated from fees
The annual customs tariff for these imports is (6) to (8) trillion, while no
Collections amount to 10% of the prescribed fee amounts! .
 Annual allocations to support losing public sector companies and earmarked grants
Self-funded bodies more than) 4) trillion dinars! (According to its laws),
Annually. ً
المباشرة Direct tax revenue is 5.2 trillion dinars, or 1% of the total
GDP, while the tax revenue rate isA huge number of real estate (lands, buildings, lands)
وزارة The Ministry of Finance has an asset
Agricultural), what can be rented or sold has recently been limited to up to 7
Trillions (in 2020) and more in subsequent years.
2020 The bill for salaries and wages in the year 2020 is about 52 trillion dinars, or a percentage
85% of oil revenues (after excluding allocations for licensing contracts), an increase (8)
Trillions of dinars for the year 2019, an increase of (16) trillion dinars for the year 2017,
These increases and booms in the payroll item threaten the state’s finances, as well as not achieving it
Any additional value other than emptying the state’s budget from achieving important development goals
And necessary. This growth in increasing these expenditures is greater than any devaluation
The dinar.
In foreign investment flows, gives
Whatever
6- The stability of the exchange rate plays a role
The option of resorting to adjusting the exchange rate whenever the state's conditions of payment are required
Gives a negative signal to investors.
rocky
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dinar - Reducing the Iraqi dinar exchange rate - determinants and alternatives - Empty Re: Reducing the Iraqi dinar exchange rate - determinants and alternatives -

Post by rocky on Sun 15 Mar 2020, 2:26 am

thanks proven

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