The project to delete the three zeros and cost cash transactions
Dr.. The appearance of Muhammad Saleh Qasim
Deputy Governor of the Central Bank of Iraq
In light of the volatile economic and financial conditions and the inflationary pressures that occurred in our country previously, and led to negative effects on the regularity of the commercial market, labor and production markets, and the standard of living of the citizens, they have generated many distortions and richness in the economy. In a manner that is not commensurate with the future developments in the present and future of the Iraqi economy, which requires finding a solution to these conditions and their consequences, and from these Solutions management system reform currency through restructuring and deletion of zeros of them to control the flow and management of the cost of money supply optimally.
The circulation of an issued cash block of more than 30 trillion Iraqi dinars in various categories, which is reflected in the number of traded papers amounting to 4 billion banknotes, is the result of a long period of inflation and economic deterioration, with the price per capita rising on the high price per capita. 2003, which means that the good that was sold for 100 dinars is now sold for 200,000 dinars ... and so on. Under this circumstance, the value of the currency has deteriorated. The largest currency category increased from 25 dinars to 25,000 dinars, which means that inflation is what added these zeros. *
* The current currency categories do not match the current and future economic situation. For example, prior to the outbreak of the Iran-Iraq war, the 25 dinar category was equivalent to $75 in the purchasing power of that time, or the equivalent of today’s 300 thousand dollars. Over three decades, inflation in the country added zero to the currency, and despite that, these zeros did not raise the purchasing power of the largest class of currency, the 25 thousand dinars, which is equivalent to $21 today. Today we need to restructure the currency. Big yards mean a large cash mass in circulation, amounting today to about 30 trillion dinars, which you require from direct cash trading, and a large cost in counting and sorting, and the time, spatial and security characteristics it takes. In the price system, the price is the value expressed in cash, so the structure of costs, wage payments, salaries, and transaction transactions all of which are not appropriate to the country’s need for a monetary management system that is consistent with the sector's monetary capacity and the structure of the sector's sector. The country needs a cash system that is easy to deal with, and the small and large groups express the cost of this real structure (see details in the footer of the next page).
It is noticed that during the period 1990-2007, the CPI increased to 400,000%. In order to simplify, the commodity that was sold for 100 dinars before the start of the Kuwait war in 1990 became sold at 400,000 dinars per year. 2007 Noting that the value of the Iraqi dinar fell twice and sharply during the period 1990-1998, at an average rate of more than 99% against the US dollar. The first depreciation was in 1990 and the other depreciation was in the year 1997, by 93.2%, which made the overall decline in the Iraqi dinar exchange rate against the dollar by (negative) (99.99%) at the end of the year 1998, and during this period alone the inflation price reached the high price of inflation. 45,000%
Knowing that inflation itself means the high price of money on goods and services (i.e. how much money do we need to exchange for a specific package of goods and services .. the more the amount of money allocated to exchange it over the same package, the more the price itself is there) Noting that the value of money is inversely proportional to the price of money, and that the price is the value of goods and services expressed in cash *
(*) Social studies indicate that the average monthly Iraqi doctor’s income was not equal to that of purchasing power in the 1990s, except for the purchase of 30 chicken eggs and 20 bread pieces in that month and over the years of the economic blockade. Also, many workers in different institutions have given up because the monthly return does not cover transportation costs to the workplace. And do not forget how distorted markets in the country have been used to trade used materials for furniture, durable goods and clothes to buy flour or sugar and meet the minimum food needs of families. The agricultural sector itself, as a food-producing sector, has deteriorated since the 1970s due to the deterioration of rural areas and the indulgence in the oil revenue in public jobs and the country's militarization during the course of the same period (for example, in Suleiman 1, 1982). While the growth rate in that sector between the years 1972-1962 was 7.1% annually, with the presentation that all commodity sectors witnessed a deterioration in growth during the 1990s, especially in the two sectors. Marveled at the industry.
Today, the average annual Iraqi per capita income from gross domestic product has increased to over $ 5,300, after it was not more than $ 750 before the year 2003. And the average employee’s income is almost twice the average per capita income of $ 10,000 per year. .
Whereas money is anything that society agrees to become an intermediary for exchange, a store of value and a unit of account, the (legal) money issued by the monetary authority under the law and with the force of the acquittal of the receivables is seen as an increase in its power as an expression of its socialization as an institutional That social institution, meaning money, and vice versa. The continuous inflation has led to an increase in the circulating currency number from 23 billion dinars in the year 1991 to about (30) trillion dinars at present, and the increase in the largest currency category from 25 dinars to 25,000 dinars over time. In this, inflation drew new numbers for the currency in circulation by adding three zeros, which increased the amount of nominal cash operations and arranged the costs of producing large quantities, including warehousing, distribution, counting, sorting, and balance-sheet compliance.
In light of price stability and optimism about the future of development in Iraq, it has become imperative to undertake a radical reform of the currency management system by restructuring it in proportion to the new and different price structure and stable levels of wages and salaries that are different from the three different levels. The largest currency denomination is now only US $ 21. Noting that the increase in the gross domestic product of Iraq from 140 billion dollars at the end of 2010 to more than 300 billion dollars at the end of 2015 will raise the cash block issued from 30 trillion dinars to about 70 trillion dinars. And the weak structure in the currency structure, as we mentioned above, has started adding a cost called the cost of cash transactions in terms of trading, whether between individuals themselves and individuals and banks and within the banking system itself. **
** The demand of the US dollar (especially the $ 100 category) has become an urgent need to settle monetary transactions in the domestic market outside the will of monetary policy, because that market looks to its larger categories at present unavailable but is embodied in the cost of money. Cash handling or cash transactions. Therefore, the Iraqi monetary system has become an urgent need for an administrative reform of the cash payment system, so that there are high levels of cash in purchasing power in easy-to-carry trades that facilitate cash exchanges for the purposes of transactions in the form of transactions in the form of transactions. Dollarization), which has had undesirable effects on the effectiveness and performance of monetary policy.
In Sweden, for example, where there is currently one of the best systems of cash payments in the world and despite this, the cost of cash circulation, counting, sorting, transporting and storing the currency costs the national economy of its domestic product of 4% of its productive domestic product. How do we compare this in a country like Iraq that manages such huge amounts of poorly structured cash, This adds to the cost of cash transactions, possibly amounting to 8% or more of the GDP, which is a burden that the individual bears in his dealings, which reduces the efficiency of cash as a social institution in support of the various economic institutions, including the money in the market, including the money in the market. It means replacing another country’s currency in circulation to base cash transactions due to declining efficacy and composition of the current cash block.
The multiplication of zeros on currency classes with low purchasing power has many difficulties, including the difficulty in expressing the monetary value, as well as the difficulties of the cash operations themselves, technical problems in the registration of statistical data and the registration of the books in the bookkeeping. Or digital devices to read their yellow at fuel stations or other digital devices.
On this basis, it became a need to reform the cash payment system through the following advantages:
First - at the horizontal level: delete the three zeros
- Converting 30 trillion dinars to $30 billion by deleting three zeros from the current currency and replacing them with a new currency, which facilitates the handling of accounts with numbers that are fewer in terms of federal budget accounts, bank balances than banks and banks. Changing or changing the income or monetary wealth of the natural and moral persons, as well as not affecting the contracts and obligations between natural and legal persons as a whole. This is called generating a function
Homogenous Function of Degree Zero,
As long as the amount of new, smaller money covers a commodity package itself,
In old money with the largest number. On this occasion, David Hume (1711-76) (a pioneering pre-class economist in his famous book) likens the political debate or political controversy issued in the year 1752 to the effect of nominal price levels with the use of cash as a sum of money, such as money. Arabic (currently English numbers), this transfer does not change basic principles of arithmetic or mathematics, as the high amounts of money leads to higher prices by the same rate. Without affecting the results of the real economy.
Second - at the vertical level: the restructuring and installation of the currency
- Since the large category of 25,000 dinars constitutes on its own (two thirds of the amount of traded securities), the issuance of larger categories means reducing the four billion banknotes currently in circulation and converting them to a number equal to (1.180 billion). 80 of the total new categories issued for trading (such as 50, 100,200 new dinars).
According to the foregoing, the cost of cash transactions between individuals and banks and between individuals themselves, whether natural or moral, will inevitably decrease in terms of counting, sorting and auditing costs. And if we know that the circulating banknotes are corroborated by the mean, it is mediated throughout the mean High security specifications, which is another burden that the cash-issuing authority bears. It has become disproportionate, stable and desirable economic progress.
In conclusion, the reasons to change the current currency reflects the fruit of economic stability and the success of the policies of the Bank CBI in maintaining stability and of the stability of the dinar exchange rate of the Iraqi price and falling inflation to decimal one and build foreign reserves support the Iraqi dinar levels not previously achieved over the past thirty years, which is a cover Iraqi currency. In addition to improving the system of cash payments and making it leave its current adhesion and composition in the past and its economic imbalances and rebuilding it on the future of economic development and its real and nominal data.
Therefore, the Bank has prepared the Iraqi central strategy of long-term viable future when the availability of appropriate opportunity, and gradually in accordance with the clear instructions and regulations, guidelines provide protection for the rights of the various interests to suit the stage of prosperity and future economic growth is expected, where will increase the average per capita income in the coming years to more than once and will step The economy is taking steps towards progress, which requires reform of the residual stages of inflation, and may require some Data in this regard.