Internal borrowing a financial crisis solutions

1/30/2016 0:00

Louay Qais Abdullah *

The concept of domestic borrowing in general is that the State borrowing from its citizens optional manner, for example, selling domestic treasury bonds or encourage savings in general or after the compulsory ways will eat later.

Domestic borrowing General Optional short, is that the government is inviting its citizens to save any deposit of surplus they have funds in banks in the form of fixed deposits, semi-annual or annual maximum order to take advantage of the amount of cash these in bridging the cash deficit and the provision of liquidity and also these amounts will also be invested in productive projects (investment) and not only used in the walk things Operational State (salaries and expenses).

to be here this natural solution in the security of stable states that have the confidence of its citizens, but?! This is where our problem in Iraq, a non-citizen's confidence in the banking system or the situation deteriorating economic actually in all the world, not just Iraq, and here we can find stimuli group believe it is sufficient to earn citizen trust and encourage savings in banks, such as:

(a) that the state give definite guarantees citizen (written guarantees), for example, form contracts between the citizen and the government, that the return of the amounts with interest accrued State undertakes in a timely manner in the case of the state's inability to provide liquidity to restore the amounts to be compensation in kind and in several ways, for example, given the drug or land at a preferential price or in the form of tax exemptions or Kmarkip traders or personal exemptions for citizens when importing cars or other ideas can be applied.

(b) increase the amount of interest from the natural limit with the increase in the amount of interest increase for fixed deposit.

It can be said in this regard that this idea can be applied and its success easily in Iraq because there are blocks large cash among the citizens is deposited in the banks at all, and certainly when the direct hold such an idea will be generated among those who made it the ideas and mechanisms are added to these ideas that will help the other to the success of such a solution.

Another method is to borrow optional internal private concept in general is that the State to borrow from a certain class of citizens (merchants and industrialists and owners of heads of funds), in particular through the issuance of a centralized treasury bonds, a usual form but that it could face a borrowing problem of the same year, the lack of confidence of citizens because of the bad economic conditions.

Here we can find some solutions that we believe as successful in attracting traders and heads of internal funds only to lend to the state to meet the fiscal deficit in the budget. It is that the State issuing treasury sovereign bonds payable with its benefits through (3) years, for example, and that the State give sufficient guarantees to the owner of the loan assures that his money will be returned with full benefits and this guarantees that we propose is to be the signing of a contract or agreement between the government and employers loans as in the case of the state's inability to repay the loan amounts with their benefits are obliged to give lenders the government the value of their money in gold from the central gold stocks to the state, and I think this is very sufficient guarantee to encourage lenders to lend to the state for a period of long-term (3) years, we believe it is sufficient to meet the deficit financial, or in the case of fumble some of the manipulation of a stock of gold to the central bank for being the guarantor of the stability of the exchange rate, can compensate lenders of merchants and heads of funds cut agricultural or residential preferential prices or give them land in exchange for their shares in some factories or public companies, all of these solutions In case the government is unable to re-loan amounts on time, and we believe that the period of (3) years is sufficient to overcome the financial crisis and the Iraqi State will be able to re loan amounts on time with benefits.