Currency and restructuring real substance to improve their scientific value
Thursday, 09/13/2012 06:33 am
d. Ikram Abdul Aziz Abdul Wahab : macroeconomic data showed the Iraqi and the existence of a state of increasing the gap and the imbalance between the cash market and the real market (goods and services), and the labor market and the whole cast a shadow on the reality of economic activity
Through the sidelines inflation translator higher general level of prices and its impact on the purchasing power of citizens and on the overall course of economic action and the increasing unit imbalance in light of the survival economy unilateral influenced by the size of foreign demand for staple and basic dynamics of the Iraqi economy, which is oil, with the continued survival of the Iraqi economy unbalanced sectoral and limited and weak effectiveness of most sectoral activities and economic development, all of which of course reflects the state of the Iraqi economy overall micro level, and exclusively reality monetary and banking, the statistics showed the CBI if to highlight the topics of liquidity, currency and banking performance, the average liquidity ratio Iraqi banks working 51%, which exceeds the ratio standard of 30%, on the other hand, the data banking activity shows that the volume of deposits with banks weak about the size of currency in circulation, where it is at best that the proportion of depositors and customers with banks 20%, while 80% them prefer cash deal to deal with the banks, reflecting the absence of banking awareness among citizens in the form that compels him to keep cash in order to avoid any occupation or disorder or potential losses.
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About progress van there, according to statistics the central bank block cash of more than 30 trillion Iraqi dinars, translated a number of traded papers and $ 4 trillion paper cash, and as reflected in the value of the currency to rise from JD 1 to 1000 dinars, and 25 dinars to 25 dinars and so .
With a margin of inflation, it was a motivation for the high number of zeros and thus, the comparison here with the dollar shows that currency conversion into U.S. dollars at the dollar makes carrying easier as well as retaining and dealing and trading.
Faced with such a situation, there rests with the orientations of the monetary authority to take an active role in influencing trends in money supply by virtue of the existence of a set of facts to support the trend towards the adoption of the strategy to delete the zeros.
Them that there is difficulty in conducting accounting transactions in pregnancy and keeping these currencies and circulation and the presence of groups of small cash unacceptable in circulation, as well as to groups other cash greatest need more time and effort to carry out counting to settle daily transactions and the difficulty of conducting transactions and bank accounts of the currencies of zeros many in practice and artistic.
I have pointed to an official source at the Central Bank that the deletion of zeros is to enhance the value of the Iraqi currency and reduce the cost of cash trading, and currency as the current where Petrlionat estimates dinars, make the process of cash handling high cost.
Hence we believe that this proposal needs to be examined from two angles: first the effect of the deletion of zeros to strengthen the value of the currency, and the second you will contribute to the process in a positive impact on monetary indicators, and whether this approach does not entail any consequences related to track financial and administrative, including operations the inevitable fraud.
In our opinion, humble that the adoption of a strategy for managing and structuring currency require briefing all economic indicators, including the effectiveness of the real sectors and services in the economy, and what percentage of its contribution to GDP sectors that are supposed to be income-generating and reflect the ability of the economy and Rsanth beside what is the status of the trade balance and the level of investments and the general budget and trade indicators, financial and monetary.
If the aim of lifting the zeros is to enhance the value of the currency we think it will not happen implicitly because appreciation of the dinar and strength come from the diversification of income sources diversified infrastructure sector so that they are able to produce goods and services and especially that the growing dependence on the oil sector as a supplier base and President makes the economy vulnerable external fluctuations on oil in accordance with the request that it be reflected on the stability of revenue from foreign exchange and cash balances enhanced the value of the currency, as well as that this situation would keep the single export content and increasing import content with a wide range of external assumption.
Thus, the saying that the procedure would enhance the value of the currency needs to pause and reflection because the currency's strength and durability comes from the strength of the economy and the diversity of its sources.
The other side and last
If this trend has been adopted by many countries, including Bolivia, Sudan and Brazil and Turkey delete several zeros from the currency of any structural reform, that, according to economic data has not been reflected on reducing the rate of inflation being not cause but the result is similar to the procedure for Iraq will not have a great impact the revaluation or reduce inflation.
In that these countries have economic stability and security and has an effective contribution to GDP and institutional frameworks and administrative, regulatory and tax rules are relatively supportive of the approach. Accordingly could be coming in a lot of questions, namely:
1. This issue if not an extensive study and degrades the quality of community, the process of subtraction Iraqi market will be presented to the imbalance and tremors once citizen could have imagined that the deletion of zeros will affect negatively on the real value of the currency.
2. Is the proposed strategy will take the nature of the correlation between the money market and the labor market and whether a comprehensive outlook will be the nature of inflation in terms of it not monetary inflation essentially only but it is a structural and structural inflation reflected in the high cost of production and price rises chain.
3. We believe that the proceeds are of this procedure is that the version the new monetary convincingly mathematically and reflecting improved value of the currency and exchange rate but in fact, the latter needs to be the basis for this image is the strength and diversity of sources of income and wealth and profits resulting from the diversity of Structure of the economy.
4. The economic situation needs to pursue structural paths economy and sectors arthropod that, if promoted, they will reflect the furtherance real value of the currency and not an account that funds will be disbursed to switch currency believe that the necessary calls to be directed towards sectors that serve the need for citizen all service sectors Health - Education - that this process may increase the smuggling of funds abroad and the promotion of the so-called money laundering.
5. Is has to take the consequences of this process of smuggling money abroad and the promotion of the so-called phenomenon of money laundering.
6. The process of removing zeros process procedural difficult and complex and need to statistics and accurate figures to the overall activities of the country's economic, the other hand must stand on the impact of the stock market in terms of the deletion of zeros reduces capital for companies, and thus affect the functioning of the market with this cost the government time and effort.
7. The direct this approach will need to review minutes of the reality of the Iraqi economy and its institutions of public and private and the effectiveness of the orientations credit support for the work of the private sector, leading to the elimination of unemployment, and review of the Iraqi economy, which has no reality and positive, represented the high proportion of real sectors to the GDP to compare experiences successful and real to other countries as the basis of the success of any reform process and administrative needs to be a radical remedy that was gradual and serious fiscal imbalances, monetary and administrative that are an impediment to development perspective in Iraq.
8. Also is questionable about (what is the mechanism and rules and regulations and the schedule is supposed adoption of activating the strategy deletions have been, taking negative dimensions can be expected for this procedure as it might be deleted as reflected negatively on the procedure institutional and domestic market and have been calculated as the consequent of fraud and financial corruption).
Thread not only delete the zeros to improve the currency or to reflect a positive image for the Iraqi economy in my account and accounting. The larger issue of reform as a development issue by any standard.