Deletion of zeros .. experts underestimate the effects of .. and the Central Bank considers a reformist project
Deletion of zeros .. experts underestimate the effects of .. and the Central Bank considers a reformist project
On: Wednesday 03/10/2012 07:48 am
Baghdad / bright Asadi
increased in recent divergent statements between shows and supporter of the process of removing zeros, where researchers economists see that the process does not have any effect, whether positive or negative in economic performance in the country, and they just change the unit of measurement,
Argued that the process of deletion of zeros relating to the reform of currency and not monetary reform, pointing out that the motives of “zeroing” is not economic, but is to facilitate the accounting process.
said vice-president of our economy for sustainable development and supporting the private sector, Dr. Abdul Hadi Jabbar slave: “The process of removing zeros do not nothing more than a change in the unit of measurement, and does not involve any effects, whether negative or positive economic performance Bmngarath real, “adding that” monetary unit current value “JD 1000″ will be replaced by unity new banknotes worth “one dinar” an amount equivalent to the “1000” JD substituted, and the case for the rest of the units other cash, “noting that” the process of deletion of zeros does not mean an improvement in the value of the currency, as the change the unit of measurement has nothing to do at all improved value of the currency, and the latter is linked to factors real express efficient economic performance. ”
he added Aboudi’s (range): “that based on the work of the Central Bank does not seek to process the deletion of zeros only, but to restructure the currency and the associated issue currency denominations large to facilitate large transactions and other categories of small to facilitate small transactions,” adding that “this process they believe lead to absorb excess money supply and facilitate the task of managing and promoting confidence in local currency and to maintain relative stability in the exchange rate, but it requires economic conditions better, “and stressed that he supports” these propositions in principle “, believing at the same time that” such action is premature. ”
The slave that “relative stability experienced by exchange rates dinar against the dollar was due to the daily auction, which is evaluated the central bank and not by supply and demand factors, and the index variables real economic whole lower now,” explaining that “the Iraqi economy is witnessing high unemployment is no hope absorbing in the near term. and productive apparatus Poor flexibility in all sectors, particularly in the commodity sectors and for reasons associated with high production costs and weak competitiveness with imported goods, and that the revitalization drain period may extend for years to come. ”
and continued that “the restructuring of the currency such This climate can not take advantage of it to promote confidence in the local currency, which could happen when you are restructuring the currency in better economic conditions coincide with the real improvement in economic indicators, and such a process involving both financial costs in the printing of the new currency or administrative costs associated replaced, and we desperately needed to ease the suffering citizens’ daily, especially from low-income families, “adding” if we take into consideration that the currency Pfiadtha current functioning satisfactorily relatively there is nothing wrong to issue currency denominations larger to cover large transactions and the postponement of the restructuring process for suitable conditions more, especially since the Iraqi economy has not seen the state of stability that makes us more satisfied in the non-occurrence of future inflation. ” This likely bonded to accompany the process of deletion of zeros prices Iraqi dinar exchange who will pay the price of foreign exchange reserves of the Central Bank, while caused by a placebo and not linked to improved real variables of the economy, and added, “The process of replacing the currency and despite all the precautionary measures in the climate tainted by corruption and fraud have put question marks for a possible force of counterfeit currency and replace it with a new currency. ”
For his part, explained assistant professor at the Faculty of Management and Economics – University of Baghdad, Dr. Spring behind, in a statement singled out the “long”, causes the supporters of the deletion of zeros, saying: “They believe that the process contribute to rename the national currency, and help stabilize the currency and absorb surplus them, and reduce inflationary expectations. ”
and continued that “the supporters of this process they consider part of the monetary reform, and they limit (dollarization) in the economy, and achieve stability in the exchange rate, and reduce the cost of printing paper currency punching foreign currency.” Opponents process of removing zeros, was her reasoning, too, which is explained by behind by saying that “the reasons for opposing the process of removing zeros are they considered the process an obstacle to foreign investors for the prevalence of wait and see during the period of conversion, and also the high cost of printing banknotes in the event of non-issuance of classes large currency “, and added that” among the reasons, the temporary increase in prices pending adapt to the new system, which may become a continuous increase, in addition to the costs of repeal banknotes and old coins, “adding,” They expect to cause the process of deleting zeros negative effects in light of financial and administrative corruption, and create a false impression, that inflation last over, and reverse the use of coins in the case of high prices. ”
explained behind that “the process of removing zeros will not have a substantial impact, whether negative or positive in the Iraqi economy,” stressing that has nothing to do inflation process of lifting the zeros.
And that “inflation is associated with a wide range of internal and external variables, not the process of lifting the zeros one of them,” adding that “to build on the foundation inflation to absorb currency raise zeros be Based unfortunate, fall in the nominal value of the mass cash via delete zeros should not be confused with reducing money supply through the mechanism of absorption currency which most directly affect the offer, “adding that” when reducing the money supply by 5%, for example, that an impact in the overall variables and monetary indicators and real, especially the interest rate, as well as in the overall internal balance and exchange rate and leave from the effects of the external balance, while raising any number of zeros, even if reducing the nominal value of the basis and the money supply rates are enormous, he does not have any significant impact, particularly on the interest rate and exchange rate. ”
He pointed back to the that “if what happened down the dollar exchange rate on the money market Iraqi – the high value of the local currency – with the deletion of zeros, we have to pay attention to the rest of the balances of foreign assets owned by the Central Bank, which – according to our belief firm – will fall to cover the rise in the value of the dinar , and so the central bank may be sacrificed to those of foreign assets in order to achieve this improvement and not the deletion of zeros is gracious. ”
He pointed out that “the process of deletion of zeros is the process relating to the reform of currency and not monetary reform, and have no effect on the level of economic performance as long as they affect in the general level of prices, including the exchange rate, not the interest rate, and does not affect relative prices will not cause an imbalance what Rates for goods and services on the one hand, and returns the factors of production on the other hand, and as long as they also do not find what prevents economically deleting three zeros or more, or add three zeros or more, “stressing that” the process of lifting the zeros will not be economic migrants, but motivated another to ease the accounting process. ”
The Deputy Governor of the Central Bank d. Appearance of Mohammed Saleh was counting project to delete zeros reformer class basis, stressing at the same time the need to achieve economic stability and political and security before you start removing zeros.
Saleh said: “The process of removing zeros prepare a reformer, but require stable economically, politically and security at the same time to be start working out, “and wondered” Is the right time to implement the project?, and whether the country is ready to make this change?, these questions Mitrokan for the government to answer them, “returned the project has no value unless received political support from the Council of Ministers and the House of Representatives. He said.
Saleh added in a statement to “long”: “The work in this project is supposed to start at the beginning of a new financial, ie when you begin the registration books calculations of the government, corporations and private activity in general, as the opening balances this begins the new currency” , expressing lack of belief that 2013 is the year of financial good to work in this project, expected to be in 2014 and beyond provides a greater opportunity to work on the implementation of the project to delete zeros.
and intercept the Iraq Stock Exchange on the implementation of this project, which they saw as harmful to the level of stock trading in the market Iraq Stock Exchange, Saleh pointed out as “objections are legitimate and positive at the same time, as the reason for their opposition is how to evaluate shares worth 750 fils after the process of removing zeros, you will value tenth penny, for example?!”.
continued favor “I want to ask Here is there in Iraq company valued its stock 750 fils?, and is there a currency in circulation amounting to one Dinar even create 750 fils?, and how to accept stock such so prices? “, adding that” the mechanism by which followed bourse was valid in the seventies, when Iraqi dinar was amended three dollars, “at the same time demanding restructuring stock prices, and not least the share price for” 1000 “dinars, for example, or any value be reasonable. He said.
This Salih stressed that “the process reset currency are not limited to raising three zeros from the currency, but also delete three places of accounts but the same value, and this is very important for a country like Iraq handles trillions that are accounting process which is very complex,” he said “The process of removing zeros contribute to raising the efficiency of the system of cash payments in the country, he handles paper large category of little value, and the goal of the project is to create a monetary system has a small class worth big cash, and this facilitates the payments system and is the economy dollarization.”
In context itself, explained a member of the Committee of Economy and Investment parliamentary deputy for the Liberal bloc Abdul Hussein Resan Husseini that the Economic Commission agreed unanimously that the current situation is not suitable to begin the process reset currency, stressing the need to enact a law if the entered a third language in the new currency. Husseini said that “the process of replacing the currency contain a lot of advantages, including reducing the volume of transactions, the fact that there is a cluster of large cash in the accounting records and banking, which began panic because huge sums dealing with it,” stressing at the same time that “the process does not give additional value of the dinar . ”
said Husseini in an exclusive statement to “long” to “Economic Commission had not seen the form of currency new, do not know you shape will change or not?, what is the mechanism that will be followed to replace the currency?, and is hand printing?, and what are the costs ?, and the rest of the details … “, pointing out that there are news counted unofficially that the” form of currency will be changed, and that there a third language a “Kurdish” will be added to it, and this needs to be the law according to the Constitution, “he added” So far nothing has come to the House of Representatives of any law in this regard is not from the central bank nor the government, so the process was parked almost. ”
This description Husseini disparity in statements of members of the committee between dismissive and supporter of the process of deletion of zeros that “represents the opinion of the Attorney Profile, and not the opinion of the Commission , “stressing that” such a decision must be by voting unanimously, because like so things are sensitive, “adding that” any statement is a technical and non-professional and for the central bank specifically whether on currency or market currency auction, it causes a crisis in the and confusion in the market selling the dollar and a rise in prices and many other complications. ”
And that “the central bank has to choose appropriate timing to begin the process currency exchange, being the most important independent and has all the powers of the fee fiscal and monetary policy of the country and control the size of the mass criticism, in addition to determining the annual interest, nor can the government or any other control work.”
It is worth mentioning that the central bank announced in August last year, a rise reserves of hard currency to $ 67 billion, confirming that these reserves are the largest in the history of the country, and it is one of monetary policies to reduce inflation in the country.
announced last January, a rise in reserves of foreign currency to $ 63 billion, up from $ 50 billion year-end 2010.
central bank held daily sessions for the sale and purchase of foreign currencies with the participation of Iraqi banks, excluding public holidays, which depends where all these auctions, and be sales either in cash, or on form of remittances sold abroad. The Iraqi Central Bank has four branches in Basra and Mosul, Sulaymaniyah and Irbil. This was the International Monetary Fund “is a specialized agency of the Bretton Woods system was established by an international treaty in 1945 to work on enhancing the safety of the global economy”, had crossed in 2009 appreciated the economic reforms in Iraq, and included strengthening the central bank and restructure banks large public sector , and the reduction of inflation, which reached more than 50% in 2006, also considered that the payment of Iraq dues that were scheduled in the year 2009 reflects the success of Baghdad in the financial reform policies and the exploitation of the substantial financial resources that derive from high oil prices.