The future of the Iraqi currency !!
The future of the Iraqi currency !!
Money, a source and document representing the state, is a symbol and expresses its political and religious system and its own philosophy. In comparison to date writing, documentation across currencies can not be questioned or challenged as a concrete fact and document for a certain period of time. Humanity has greatly benefited from the history of civilizations through the study of its currencies and their holdings
The discovery of currency is compared to the discovery of printing, as it facilitates the process of exchange between people and traders alike, and the currency is one of the main components of the market; without it, there can be no buying and selling
Before the entry of the British occupation forces in October 1914 was the currency among the people is the Ottoman lira, after which the British occupation authorities introduced the Indian rupee as the currency of circulation, and after independence was established the first council to issue the Iraqi currency in 1931, was linked to the Iraqi dinar in pounds sterling, The July 14, 1958 Revolution The dinar was pegged to the pound and pegged to the US dollar
The Central Bank of Iraq issued a new currency of paper and metal, bearing the slogan of the new Republic. New issues of paper currency were issued in 1971, 1973, and 1978. The Iraqi dinar suffered a continuous deterioration in its value after the Iran-Iraq war began, dropping from $ 3.3 per dinar in 1980 to about $ 4 in 1988.
As a result of the invasion of Kuwait and the issuance of resolutions of the Security Council to impose a blockade on him, and the deterioration of the value of the Iraqi dinar, forced the Central Bank of Iraq to issue currencies that were not traded before, issued banknotes of 50 and 100 dinars, followed in 1995 issued a paper of 250 dinars, The year 2000 issued a cash paper bearing the category of 10,000 dinars, and it is noted that all these categories were carrying the image of former President Saddam Hussein. The citizen carried large packages to buy his simple needs, which do not exceed eating and drinking
After the fall of the former regime, specialists began to think about how to restore the spirit of the Iraqi dinar, and remove the heavy legacy of the Iraqi economy, they began to put the idea of removing three zeros from the current currency
The deletion of zero is defined as a process by which the nominal value of the currency is adjusted due to high inflation and devaluation. Countries such as Brazil, Argentina (South America), Yugoslavia and Poland (countries in the orbit of the Soviet Union) Ireland (for joining the European Monetary Unit), a process different from the devaluation process,
But can such action be implemented? What are the pros and cons of the economic movement in Iraq? Could it really help to reduce inflation rates? Finally, what is the right timing for it?
This process is still controversial in the government and monetary circles, businessmen and specialists. Some believe that doing such a process will lead to more corruption and tampering with public money, because of what is happening in the process of currency change, and it will create a state of chaos and confusion in contracts internally and externally, And that it will not change anything from the fact that the amount of the issued paper will remain the same
At a time when an optimistic team believes that this process will lead to the restoration of prestige of the Iraqi dinar, if accompanied by the improvement of the dinar exchange rate, and the process of calculations in various fields will be less complex and simply
We do not deny that the process of deleting zeros is a necessary and important step comes within the need for the country to the process of administrative reform of the currency contribute to reduce transaction costs and cash transactions in the economic process, and reduce the size of the country’s monetary mass and help to facilitate calculations and reduce the amplification of numbers, if applied Properly and at the right times. But there must be introductions to that process, including choosing the appropriate time in which the Iraqi economy in a state of stability, and then create the economic environment in a deliberate manner to implement the deletion, and this requires the procedures and financial and banking decisions taken by the financial authority in the country.
The process of replacing those “in the process” will cost the state budget of 172 billion dinars (150 million dollars), which is a large amount is significant, if we add the effort of the banking staff and the time that will be lost by the process of switching, and can not Forget the attempt of the weak souls who will try to profit from that process by all means and methods!
It is true that this process will not have an impact on the purchasing power of the citizen, since the exchange of currency will take place in another currency. There may be some shock in the market as a result of this switch, but it is a temporary shock. It is not bad to see the experiences of many countries replaced the currency, such as Turkey, which continued its currency exchange for four years, the Turks remained trading the old currency with the new currency until they were all withdrawn from the market without the market confused
The most important negatives that will accompany the process of deletion of zeros is the cash illusion, as the deletion of three zeros from the Iraqi currency will sign the citizen under the illusion of cash, which is the most prominent negative that can affect the Iraqi citizen in the event of deletion of three zeroes of the current currency is a significant effect, This will be the result of colliding with the value of the new currency after the deletion, leading him to believe that the value of its assets has decreased by dividing them on the three zeros.
The Iraqi citizen would like to see his currency strong, so the process of raising zeros will contribute to the revaluation of the currency, and reduce the proportion of demand for hard currency, which is characterized by force, and will lead to a balance between the value of domestic and foreign currency and will give them market power at home and abroad, It is possible that the value of the Iraqi currency against the US dollar, for example, that the employee who receives 1200 thousand dinars at the exchange rate 1200, the purchasing power of $ 1000 dollars and if the strengthening of the dinar equivalent to 500 dinars to the dollar will be purchasing power $ 2400 instead of $ 1000