Is it time deleting three zeros from the Iraqi currency
Project restructuring the Iraqi currency is facing a heavy legacy of inflation, which is fighting any possible economic reform.
Middle East Online
By: d. The appearance of Mohammed Qasim
In light of economic conditions and volatile financial pressure and monetary inflation that has befallen our country before, and led to negative effects on the regularity of the commercial market and the labor markets and production and living standards of citizens, it has generated distortions many structures, economic relations, among which was the Activity block cash many zeros of little value and way that is not commensurate with the future developments in the present and the future of the Iraqi economy, which requires a solution to these conditions and offal, and these solutions reform the management of currency cash through the structure and the deletion of zeros to control the flow and management of the cost of the cash block optimally.
The trading bloc cash exporting more than 30 trillion Iraqi dinars to the various groups and reflected by the number of securities traded $ 4 trillion paper money is the product of a long period of inflation and economic decline, rising, for example, the index of consumer prices Bassas 1993 from 100 to 200,000 in the midst of the year 2003, which means that the item that was sold for 100 dinars became sold for 200,000 dinars ... And so on. Under such circumstances, the deterioration of the value of the coin currency rose greater than 25 dinars to 25,000 dinars, which means that inflation is added, these zeros
Categories do not fit with the current currency of the current economic situation and the next. For example, before the outbreak of the Iran-Iraq war was the category of 25 dinars equivalent to $ 75 purchasing power of the time or the equivalent in the present 300 thousand dinars. I said inflation in the country over three decades of zeros to the currency, although this did not raise those zeros of the purchasing power of the largest category of the coin is 25 thousand dinars, which is equal to today's $ 21. We need today to restructure the currency. Valasfar mean large cluster of large cash in circulation today of about 30 trillion dinars, which requested the circulation of cash directly and significantly to the cost of sorting and counting and it takes time and spatial properties and security. In the price system, is the price is expressed in exchange value and thus the structure of costs and payments of salaries and the Cubs and eventually become Akiem all transactions not commensurate with the needs of the country into a cash management system consistent with the restructuring of the real sector and price levels reached. The country needs a monetary system is easy to handle small groups and large reflect the real cost of that structure.
Especially if we know that inflation means self-rising prices of cash money price of goods and services (ie, how much money we need in exchange for package of goods and services .. the more increase the amount of money allocated in exchange for the package itself means that there is inflation or a rise in the price of money) . note that the value of money is inversely proportional with the price of money, especially if Maalmana that price is the value of goods and services expressed in cash. Since the money is anything agreed upon the community to become a broker of exchange and store of value and unit of account, the money (legal) issued by the Monetary Authority under the law and with the power of discharge of the receivables and is seen as a social institution Social Institution increases the efficiency of the economy and economic ventures in moving the exchange efficiency of the institution social or money, and vice versa. Has led to high inflation continued currency of No. 23 billion dinars in 1991 to about 30 trillion dinars at the present time, the high currency the largest category of 25 dinars to 25,000 dinars over time. In this, draw the inflation figures of new currency in circulation by adding three zeros, which increased the amount of cash operations in nominal and arranged the production costs of large quantities of them were accompanied by operations, storage, and distribution of promise, sort and check to accompany her and the levels increase, helped to increase the operational risks associated with Operational Risk.
In the light of price stability and optimism in Iraq's future development, it became necessary to hold a radical overhaul of management system of currency and the re-structure commensurate with the structure of the new price is different, stable and levels of wages and salaries, which differed significantly from the last thirty years, as well as handling the mass of large cash weak components so that become the largest category of currency, but not worth $ 21 U.S. for the time being. Noting that the increase in gross domestic product, Iraq's $ 140 billion at year-end 2010 to more than $ 300 billion at the end of 2015, will raise the monetary mass exported from the 30 trillion dinars to about 70 trillion dinars. And installation in the structure of the weak currency as mentioned above may take the added cost is called the cost of cash transactions in terms of traded between individuals and within individuals, banks and the banking system.
The demand for the U.S. dollar (in particular the category of $ 100) has become an urgent need for the settlement of cash transactions in the local market beyond the control of monetary policy to the fact that market is looking at the transactions into categories, the largest currently unavailable, but it reflected the category of U.S. currency large for easy carrying and handling. Therefore, the monetary system of Iraq need to reform the administrative order to have a monetary of high purchasing power in the trading easy pregnancy and acquisitions in order to facilitate exchanges cash for the purposes of transactions and trading noting that the imbalance in the structure or installation of monetary units have the depth of the problems of "dollarization", which impacted undesirable on the effectiveness and performance of monetary policy.
In Sweden, for example, that where there is currently one of the best systems of cash payments in the world, however, the cost of trading cash counting, sorting, transport and storage of the coin cost the national economy gain of 4% of the GDP of Sweden. How can we compare this in a country like Iraq shall be managed so amounts of cash tremendous weak structure, which adds the cost of cash transactions may have up to 8% or more of the gross domestic product, a burden borne by the individual in his dealings, which took reduces the efficiency of the exchange as a social support for the institutions of the economy different, including the market as evidenced by the large cash transactions are limited to the payment in U.S. dollars, which means substituting other country's currency in circulation for the award of cash transactions because of falling efficiency and installation of the current monetary bloc.
And raises the multiplicity of the zeros on the categories of currency with a lower purchasing power has enormous difficulties, including the difficulty to express the monetary value as well as the difficulties of monetary operations itself and the technical problems in the recording of statistical data and registration in the accounting books and changing the computer systems and settlement systems as well as show price figures for a long difficult sometimes even counters or digital device, read the digit at gas stations or other digital devices.
On this basis, the need to reform the system of cash payments through the following advantages:
- At the horizontal level: delete the three zeroes
- Transfer of 30 trillion dinars to $ 30 billion by deleting three zeros from the current currency and replace it with a new currency making it easier to handle arithmetic with numbers are less numerous on the level of the accounts of the federal budget, budgets of banks and companies as well as balancing family cash (individuals) without arranging any change or change of income or monetary wealth of the people, the natural and moral as well as the lack of impact on the contracts and obligations between natural persons and legal entities all. It generates a so-function sports homogeneous degree zero Homogenous Function of Degree Zero, as long as the amount of new money covers the smaller number in the package of commodity exchange in the same old money with the largest number.
- On the vertical plane, the restructuring of the currency and installed
- As the large category of $ 25,000 a JD alone (two thirds of the amount of securities traded), the biggest issue categories mean reduction of four trillion banknote currently in circulation and converted to a number equal to (2. billion banknotes. Stakhtzel as large groups of the coin about 90% of the total categories exported to the circulation.
Based on the foregoing, the cost of cash transactions between individuals, banks, and between individuals themselves, natural or moral will fall inevitably in terms of the cost of counting and checking. If Maalmana, the banknotes traded eroded the average over a period of five years, which means the replacement of enormous mass weak structure and the consequent costs of printing specifications, a high-security burden is borne by the authority of another version of the remnants of a cash management system cash generated by the economic downturn and the former has become not fit, stability and economic progress desired.
Finally, that the reasons for changing the currency of the current reflects the fruit of economic stability and success of the policies of the Iraqi Central Bank in maintaining stability and of stability of the Iraqi dinar exchange rate and lower inflation to the level of one decimal place and build reserves of foreign support of the Iraqi dinar at levels not previously achieved during the last thirty years ago, which is a cover Iraqi currency. In addition to improving the system of cash payments and leave him stuck to the past and the actual composition and its imbalances and economic re-construction on the future of economic development and its data in real and nominal.
So, has prepared the Iraqi Central Bank strategic long-term viable future, when the availability of the appropriate opportunity and gradually according to clear instructions and regulations, guidelines provide protection of the rights and interests in line and the stage of prosperity ahead, economic growth is expected in terms will increase the average per capita income in the coming years to more than once and will step steps towards economic progress, which requires a reform of the waste stages of inflation and may require some legislation in this regard.
D. The appearance of Mohammed Qasim
Deputy Governor of the Central Bank of Iraq