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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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    The value of the Iraqi currency and structural economic imbalances

    Hkp1
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    The value of the Iraqi currency and structural economic imbalances Empty The value of the Iraqi currency and structural economic imbalances

    Post by Hkp1 Wed May 15, 2013 2:31 am

    The value of the Iraqi currency and structural economic imbalances



    The value of the Iraqi currency

    And structural economic imbalances

    D. Kamal Al-Basri and harmful Sbahi professor

    Iraqi Institute for Economic Reform

    Article
    seeks to examine the value of the Iraqi currency fluctuations and
    interpretation of structural imbalances and weak governance vocabulary
    application and other behavioral factors. And concludes that the
    following factors may have led to increased demand for foreign
    currencies and shortage of supply: External political, and weak business
    environment, the economic and fiscal policy, and the lack of political
    and economic stability, and the weakness of the productive capacity of
    local, and that the improvement in the rate of per capita income of Iraq
    was a factor is the other, weak governance and the rule of law, and the
    decline of family remittances from abroad, and the growing presence of
    financial transfer companies and brokerage firms (parallel market), and
    the emergence of trade zones in border ports.

    Apply thanks to Dr. Ahmed Hamdi al-Husseini, for his participation in the preparation of this paper

    The value of the Iraqi currency and structural economic imbalances

    Article
    seeks to examine the value of the Iraqi currency fluctuations and
    interpretation of structural imbalances and poor application of good
    governance vocabulary and other behavioral factors.


    1. Structural imbalances

    Derive
    the Iraqi currency recovered from the substance of the economy, and it
    can not be studying the stability of the value of the currency away from
    the deal with the economic reality. Currently economy suffers from
    weakness in its components core, boils down to the reality of the Iraqi
    economy through the reflection in the components of GDP in 2011, where a
    different sectors to the GDP as follows: Oil 54.74% and Agriculture
    4.15% and the industry about 1.83% .... Etc. It is clear that the Iraqi
    economy's dependence on the oil sector. We have increased the value of
    gross domestic product (GDP) at current prices from 53 499 to 211 310
    000 000 Iraqi dinars for the period 2004 -2011, for the same period
    increased the value of gross domestic product (GDP) at current prices
    excluding oil from 22.691 to 95.822 Mlyardinar.

    The problem is
    that when oil revenues are much bigger than the financial returns
    obtained from taxes, the government will find usually have at their
    disposal a significant financial asset earning easy (not achieved at the
    expense of the financial resources of the citizens). This phenomenon
    will be encouraged in the absence of democracy (in the full sense) to
    give the government ample space to act on public money are inefficient,
    and examples of this have to resort for governments to adopt:

    1) economic policies sterile in its effects: represented an increase of
    salaries and wages away from the accounts of labor productivity, and
    expand to create employment for the purposes of non-productivity
    resulting them inflated prices, and pursue a policy of supporting
    non-economic updated deformation in the structure of the economy and
    market indicators, and the trend towards spending unproductive political
    in essence, aims to connect the citizen power.

    2) non-spending
    economic policies: represented activities have no justification and
    كالمنح economic aid and open the external circuits and cultural
    diplomacy does not add real value to the economy and citizens, and be at
    the expense of pressing economic areas related to the dignity of the
    citizen.


    As a result of each of the foregoing, the private sector
    in these countries enjoy the presence of weak and marginal, because it
    does not enjoy the support (as is the case in the public sector), which
    is concentrated in the areas of economic, commercial and service. The
    absence of the real role of the private sector means the absence of
    creativity and speed of adjustment to market needs and provide
    employment outside the public sector. The uniqueness of the public
    sector production and the absence of private sector competition lead to
    the continued deterioration of the efficiency of public sector output,
    الامرالذي requires government intervention and protection of the public
    sector through financial support and customs protection policy
    (currently support annual rate of 3 billion dollars). Thus, the
    government is working to protect the institutions of inert productivity
    at the expense of the citizen, who he unchanged obliged to buy goods or
    services at a higher price and the quality is poor. This usually
    sacrifice and also emphasizes global trials does not lead in the short
    term and not run into improved performance and efficiency of the
    production of the public sector. The absence of political role of the
    private sector turns citizens into a cake and hired government employees
    belonging to the directions of the government, which is no doubt it
    would affect the independence of the individual from the government and
    then the breadth Square independent civil society organizations. The
    government's move in those contexts eventually lead to a split into two
    factions citizens of different users and others.

    Because of
    limited job opportunities that could be created by the public sector,
    the government is seeking to create jobs through the promotion of the
    role of the security by increasing the number of employees of the police
    and army and take advantage of the surplus cash in the purchase of arms
    and military equipment. The growth of military capabilities encouraged
    to address the internal and external differences militarily, and then
    pre-empt any signs of growth and development in absolute terms. On the
    other hand that the adoption of oil revenues on the price of oil world
    market displays the economies of those countries to the waves of the
    tide, which is reflected by the sharp fluctuations in oil revenues (as
    Invert in planning the federal budget from 2008 to 2009. Finally, the
    oil revenues of the States usually benefit including the cities over the
    countryside, and this is what causes a migration from the countryside
    to the city, but no doubt that this migration is usually in short period
    of time resulting in bottlenecks sharp due to insufficient supply of
    services in relation to demand and to social and economic problems
    manifold. and Aaktefi impact of this situation on the the level of
    services available in the city to exceed the weakness of the
    contribution of rural areas in the agricultural and livestock production
    and for changes in the fertility of the earth, and that lead to heavy
    losses. fact that what progress we can find him credibility in the Iraqi
    economy, especially during the period of time 1968 - 2003, no doubt
    that the effects of these policies and nature has not changed radically,
    because of the political pressure that list reflected the weakness of
    political will to change.


    2. The market value of the Iraqi currency

    Released
    in 1930 the first of a special law to issue currency Iraqi Dinar, and
    in 1932 was the issue of the Iraqi dinar and the dinar = 3.3 pound
    sterling, and in 1958 was the disengagement with lb dinar has been
    linked to the U.S. dollar on the basis of the dinar = 3.3 U.S. dollars.
    During the period from 1932 until 1990 was issued by the dinar Version
    12, and after 1990 the currency was printed locally in Mesopotamia Press
    and exchange rate-, and after 2003 were printed issue a new currency
    from the dinar, and became a floating exchange rate orbit. Figure (1)
    shows the exchange rate of the Iraqi dinar against the U.S. dollar, the
    official at the Central Bank (Auction currency) and in the parallel
    market (the local exchange market) for the period from January 2011 to
    February 2013.


    Source: Central Bank of Iraq

    The local
    currency is part of the sovereignty of the state and also is reflecting
    the amount of economic well-being, and plays the exchange rate played an
    important role in the economic activities of the States, whether that
    activity commercial or investment, which occupies the exchange rate hub
    in monetary policy, where it can be used as a target or a tool, a as
    well as an indicator of competitive state through its impact on economic
    growth components, such as investment and the degree of openness to
    international trade and capital flows, and the development of the
    financial sector.

    And knows the exchange rate: is the ratio
    obtained on the basis of the foreign exchange swap in the national
    currency. The exchange rate is determined according to the law of supply
    and demand, the more demand the price of the currency and the lower
    demand for less price. There are two types of drainage systems used by
    States to determine the value of its currency:

    Fixed exchange
    rate systems: are installed either currency exchange rate into a single
    currency is characterized specifications certain Kalqoh and stability.
    Or to a basket of currencies on the basis of the currencies of key
    trading partners, currency or constituent unit of the Special Drawing
    Rights (SDRs), or minerals Althmnah such as gold and silver.

    Flexible
    exchange systems: characterized by flexibility and usability of
    adjustment on the basis of certain criteria, such as economic
    indicators.

    State may follow a managed floating system where the
    authorities adjust exchange rates based on the level of frequency has
    reserves of foreign currencies and gold. Or use the free float, which
    allows for the currency value to change up and down as the market, this
    system allows for economic liberalization policies of the exchange rate
    restrictions.

    Itathersar exchange first measures the central bank
    which represents the key management in the state to identify and manage
    monetary policy so as to contribute to the achievement of economic
    goals that are looking her state, and secondly commercial banks and
    remittance companies financial terms intervene in the market to execute
    the orders of their clients or for its own account, where these centers
    collect customers and orders doing banking Palmqasat, and thirdly they
    are brokerage firms and brokers who collects militants Omer purchase or
    sale of hard currency for the benefit of several banks or other traders
    away from transparency.


    Factors affecting the currency in Iraq

    Recently
    and over the past few months, decreased the value of the Iraqi dinar
    against foreign currencies, reaching in some cases the market Parallel
    1300 dinars per dollar, after it was stable on the rate of 1185 dinars
    per dollar, despite the stability of the selling price of the Central
    Bank's 1166 dinars with commission of 13 dinars for transfers any 1179
    dinars to 1171 dinars to the sale of cash and this indicates to the high
    demand for the dollar in the domestic market and for the following
    factors:

    • 1 - External factors: formed a political and economic
    crises in neighboring countries (Syria and Iran) and embodied in the
    need for these countries to the dollar currency and foreign currencies.
    Who got the local currency is reduced in those countries and reflected
    down the price of exports to Iraq, and create windows to attract the
    dollar from Iraq to those countries through transactions to the Iraqis
    and alluring at the same time a source of hard currency to the Iranians
    and the Syrians. On the other hand there is interdependence of social
    and family with these countries may also have to exit port dollar, but
    it is difficult to predict Bmekdarh.

    • 2 - economic business
    environment: represented by the factors which result lead to a flight of
    domestic capital and the decline of foreign investors, including
    political instability and the absence of the rule of law in economic
    transactions. There is no doubt that the time period that followed the
    2008 saw an improvement in the security situation and then in the rate
    of inflation and the exchange rate. However, the economic environment is
    still repulsive acts do not encourage project planning medium or
    long-term. Which led to limited activities on some business and
    commercial projects yielding profit fast, but I doubt that the
    percentage of it turning to countries other scarce liquidity arising
    from the impact of the financial crisis that began in late 2008
    (reaching rank Iraq 165 of 183 countries in 2012)

    • 3 - fiscal
    policy: Previous years have seen high levels of government spending at a
    greater rate than any other country in the world (public spending rose
    from 34.6 trillion dinars in 2004 to 117.1 trillion dinars in 2012) and
    most Pictures Consumer spending is leading to the rise in spending the
    outside world (travel, medical services and seminars, and import of
    goods and investments in real estate projects, etc.), and also led to a
    rise in net Iraqi currency traded amounting to 36 trillion dinars in
    2013, raising the demand for foreign currency, where the value of
    imports of Iraqi 37.3027 billion dollars in 2010 to 40.6325 billion
    dollars in 2011, a change rate of 8.9%.

    • 4 - double tax
    policies: also include the non-application of the customs tariff law and
    of course that result in flooding the market with goods and services
    payable to the dollar in most cases. Also twice as efficient collection
    of receivables Aldharbah check ensures additional profits may find their
    way because of the weakness of bank credit to the Iraqi abroad dollars
    Authority.

    • 5 - political and economic stability: Because that
    Iraq states described as phase transition, and the political and
    economic stability, we find the proportion of individuals maintain
    accounts in foreign banks abroad and usually they are of senior
    officials and wealthy, and increasingly these transfers directly
    proportional to the height of the oil revenues.

    • 6 - the
    weakness of the local productive capacities: that the improvement in
    Iraq's per capita income of 1670 dollars to 5400 dollars makes looking
    for initiating more in terms of quantity and quality. This factor is
    reflected in the market through external spending on the import of
    machinery and new materials or by increasing spending on foreign
    consumer goods.

    • 7 - weak governance and the rule of law:
    reflected Bagr the public money, corruption, and an example of the
    identification of projects guesses more than their real value, lead
    naturally raise the frequency converter of the Iraqi dinar to the
    dollar.

    • 8 - الحولات the family from abroad: in previous years,
    there was a significant proportion of family الحولات from abroad are to
    the inside and on the impact of improvement in the rate of per capita
    income of Iraq, but this has now eased transfers to large ranges.


    9
    - money transfer companies and brokerage firms (parallel market): The
    presence of these companies to encourage the practice of monetary and
    foreign transfers that make up the pressure on dollar assets and was the
    first adoption documentary conversions.

    • 10 - the low incomes
    of non-oil foreign currencies due to lower international grants and aid
    for reconstruction and the decline in the U.S. presence in Iraq Akhas.


    11
    - trade zones at border crossing points: that the presence of these
    areas encouraged to pay cash in dollars directly at the border points of
    contact, which thus leads to a direct increase in demand for the
    dollar.


    Recommendations

    That what is happening deformation
    in the structure of the Iraqi economy is a foregone conclusion rentier
    economic policy, and is not expected to control this deformation near
    extent. As the work requires the application of institutional governance
    vocabulary of the adoption of competencies, strategic vision, a sense
    of responsibility, transparency, ensure the rule of law, ensure
    participation and acceptance unanimously and achieve the goals of
    equality can not be achieved in the near term also. Overall solutions in
    monetary policy requires a long time to achieve the desired results,
    based on the factors affecting the local currency in Iraq find it
    necessary solutions and division into two procedures:


    Quick solutions (short-term):
    1
    - to reduce pumping hard currency (cash sales) in the central bank
    auction and the adoption of increased foreign remittances.

    • 2 -
    cash sales price increase in the central bank auction for the equivalent
    of selling price in the auction of foreign remittances in order to
    cancel the profit realized because of the difference between the two
    rates.

    • 3 - buy and sell foreign currency for remittance
    companies and financial companies to mediate done by licensed banks in
    Iraq in order to reduce non-compliant transactions of the conditions and
    procedures adopted.

    • 4 - forcing traders and dealers in the
    areas of trade exchange between Iraq and neighboring countries to deal
    financial transfer and letters of credit instead of cash purchases.

    • 5 - commitment to a transparent auction information and cash transfers and development of an electronic information system.


    Radical solutions (long-term):• 1 - the audit of the financial policy of the state and reduce inflation in operational spending.

    • 2 - need to speed up plans for banking reform measures in order to facilitate the cash exchange.

    • 3 - to improve the tax code and work to expand horizontally while reducing tax evasion.


    4
    - activate the law of customs tariff because of its important role in
    providing incentives for producers with economic advantage, leading to a
    reduction in the volume of imports as well as improved operating
    income.

    • 5 - improve the business environment in order to raise
    economic efficiency of production companies and local productive
    enterprises that will reduce imports and increase the intake of foreign
    currency through export and attract foreign investment.

    • 6 - the
    use of modern electronic mechanisms in the distribution of salaries and
    the use of bank instruments and encourage saving.

    • 7 - can
    issue a new currency or deletion of zeros from the current currency to
    have a positive psychological effects on the local currency dealers.

    D. Kamal Al-Basri

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    weslin3
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    The value of the Iraqi currency and structural economic imbalances Empty Re: The value of the Iraqi currency and structural economic imbalances

    Post by weslin3 Wed May 15, 2013 10:07 pm

    Big struggle if they don't get their country going with a valued currency.
    ron-man
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    The value of the Iraqi currency and structural economic imbalances Empty Re: The value of the Iraqi currency and structural economic imbalances

    Post by ron-man Wed May 15, 2013 10:39 pm

    Very long,but also very interesting.thanks.

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