[Shredd] Central Bank looking mechanisms to support investment in Iraqi dinar Published on Saturday, 16 February / February 2013 13:54 | Written by: OK-AR-N | | | Views: 10 BAGHDAD /
obelisk: Search Central Bank, Saturday, mechanisms to support investment in Iraqi dinars, pointing out that he was seeking to boost his tally including currency makes it controlled.
The central bank governor said Abdul Basit Turki agency, following a meeting directors-general of private banks and the Iraqi civil operating in the country, for "obelisk" that "it is necessary to develop plans modern and necessary for the advancement of the level of the Iraqi dinar and the involvement of private banks Iraqi foreign to this approach."
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"The meeting included discussion of the mechanics of investing in support exchange value of the Iraqi dinar and stabilize the market and go to further contributions to these banks operating in the country in support of these necessary steps," stressing that "private banks Iraqi and foreign proved contribution actors in the development of the economy in the country" .
The governor of the Central Bank of Iraq in search of the 13 of February with a number of foreign banks ways to expand its work in Iraq.
The CBI attributed the earlier reason for not attracting well known international companies to invest in Iraq, the internal and external factors, is the external ones that Iraq is still under Chapter VII which he considers threatened state of peace, as well as the difficulties large facing investor such as the allocation of land plots of projects and a lot of other obstacles. LINK
[Shredd] IMO, this article is talking about investment in the financial markets.
So let's say we all are institutional international investors who are wanting to buy an iraqi dinar-denominated bond of 100 million dinars face value.
Ok, so we need to pay US dollars for this bond and so a foreign exchange needs to be done to calculate how much we are going to pay for this 100 million dinar bond.
This is done by multiplying the current exchange rate times the face value of the bond to come up with what we will actually pay out of our pockets.
We do this all the time at my bank and it's simply a reality that from one day to the next, what we could actually pay for this trade could fluctuate a bit.
This is acceptable to both buyers and sellers in the market, BUT......if they think the exchange rate will fluctuate enough, one way or the other, this will affect when they trade.
[Shredd] Makes sense, right? If we could spend quite a bit less for the same sized bond, wouldn't we wait?
[Shredd] "it is necessary to develop plans modern and necessary for the advancement of the level of the Iraqi dinar and the involvement of private banks Iraqi foreign to this approach."
So, this part of the article says to me that the CBI is saying how necessary it is to have the dinar advanced NOW
[tlm724] awesome !
[Shredd] (remember, the context of this article is investment), and the local banks, foreign to the international investor, will support this. See more about that here: "private banks Iraqi and foreign proved contribution actors in the development of the economy in the country"
[Shredd] And then finally this part:
[Shredd] "The meeting included discussion of the mechanics of investing in support exchange value of the Iraqi dinar and stabilize the market...
This speaks to the reality of the example I gave earlier. Mechanics need to be in place to stabilize the dinar (again, the context here is investment), so that huge losses are not a daily possibility while the dinar fluctuates a lot.
[Shredd] Now here is my point.....my last few words right there "while the dinar fluctuates a lot". In my example given, the current situation does not cause an issue....the exchange rate has been stable, right?
[Shredd] But IMO, the CBI is saying to us very openly, that the exchange rate is about to and NEEDS TO change quite a bit, so we need to ensure there are mechanisms in place (again, in regards to investment) which the local banks play a key role (the above excerpt says "actors") to make sure investment still takes place....no potential losses to investors.
[Shredd] So, how will they do this? Well, with many articles as of late, I've pondered this.
[Shredd] So as not to hinder international investment, I believe the CBI will have mechanisms akin to legal agreements that will adjust the notional amount of investments to adjust as the exchange rate matures to where is normalizes.
[Shredd] Now, some of us think the dinar will grow via a free float while others think it will grow via a continued managed float.....or maybe a combination of both. This is exciting to see!
[Shredd] The CBI met with "directors-general of private banks and the Iraqi civil operating in the country" to develop these mechanisms so investment can happen. IMO, This confirms for us:
1. The dinar exchange rate is going to grow (no lop)
2. The dinar exchange rate is going to grow quickly (otherwise no need for mechanism to address this issue)
3. The dinar exchange rate is going to grow soon, because:
[Shredd] (international investors are not being attracted due to iraq still being in chap 7 as mentioned at the end of the article and it looks like that is being addressed soon which will remove this negative perception from international investors and they will want to come running to Iraq!) so, hopefully this sheds some perspective on this article.......
[Shredd] I think the CBI is revealing a lot to us, regarding timing, progress and urgency
[tlm724] amazing, thank you Shredd
[gaffi347] Shredd Great stuff! TYVM
[lightingcslt] shredd awesome ty so much
[BondLady] thank you very much Shredd, just awesome
[Shredd] your quite welcome - Shredd out