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The exchange rate of foreign currencies in economic feasibility studies DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

The exchange rate of foreign currencies in economic feasibility studies

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The exchange rate of foreign currencies in economic feasibility studies Empty The exchange rate of foreign currencies in economic feasibility studies

Post by claud39 on Sat Dec 07, 2019 10:19 am

I came across this is an article of 2010, interesting to read, good day to all!


Claud (Moose)




The exchange rate of foreign currencies in economic feasibility studies


The exchange rate of foreign currencies in economic feasibility studies Spyder-win-20150818-135629_3_orig.jpg.cc1470897999ecb8adfcd420885b46af



Below you will find the central controls related to the exchange rate of the foreign currency to convert the entries and
outflow of the foreign currency project into its equivalent in the local currency, ie by calculating the
discounted net present value standard and the internal return on investment in economic analysis that governs investment projects
which cost more than one million dinars.

Estimate the shadow price of the foreign currency:

1. There is a need for central controls to change the official exchange rate * to reflect the
fictitious price of the foreign currency, and this is considered one of the necessary requirements to apply the net present value
standard discount rate and the internal rate of return on investment in the economic calculation indicated in
the instructions, paragraph nine.
Central controls for the adjustment of market prices have distinguished a

 group of products and inputs in international trade,
where the production or use of these projects is reflected on the abundance of currencies in the economy
and, therefore, the products or inputs used for these projects are considered purely foreign. monetary production

y in the economy
and, therefore, the project outputs or inputs used are considered output or purely foreign currency inputs.

* What is the exchange rate: the number of foreign currency units, expressed in
dollar for a dinar.

In particular, the following outflows and currency inflows were distinguished:
• Export-outputs.

• Locally traded products that replace imports.

• Imported inputs.

• Locally produced inputs that are generally for export.

• Foreign work.

Under the pricing rules, the value of output and inputs (traded) is calculated using
export prices (FOB) and import prices (CIF), as indicated in the pricing rules.
In other words, the pricing rules calculate what the project produces from foreign currencies
(quantity of exports multiplied by the export price (FOB) in foreign currency or the quantity of
substitute imports multiplied by the import price (CIF) in foreign currencies, as well as
project uses imported currencies and inputs multiplied by the import price (CIF) in
foreign currency, etc.).

In a later stage, the outputs and inputs of the project must be converted from the foreign currency into its
equivalent in local currency (dinars) using a specific exchange rate for the foreign currency.

2. Justifications for exchange rate adjustment: There are a number of important and powerful arguments
that support the view that the official exchange rate reduces the real value of currencies for the purposes of
calculation of the national economic profitability of investment projects and, consequently, for investment planning purposes
. It is demonstrated in this context to call to evaluate the dinar for less than (3.208) dollars (official
exchange rates) when assessing the outputs and inputs of traded goods, imports and
substitute imports, etc., etc.

The justifications for using an exchange rate below the official exchange rate are as follows:

• Using an exchange rate below the official rate is the appropriate action for the
level of investment planning to translate the country's economic strategy to stimulate central investment in
sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of
base of domestic production in order to reduce imports and compensate with local products. This helps
reduce reliance on foreign exchange earnings from crude oil exports and increase the share of non-oil
local production.

• The application of the modified exchange rate to inputs imported by the project will help to
divert investment away from aggregate sectors that depend on imported inputs and focus on sectors that depend on
locally produced inputs.

• The use of the modified exchange rate corrects the balance in favor of the traded goods sectors
compared to non-traded goods.



• The real exchange rate has fallen rapidly since the early 1970s, due to the rapid rise in the price level
and local costs that led to the stability of the official exchange rate to change prices and the actual local rate
costs that gave an advantage to imported products over domestically produced products, which resulted in
deterioration of the competitiveness of alternative substitutes and export products.

• This action shows that the official exchange rate overstates the value of the dinar, compared to
http://www.mop-iraq.org/mopdc/index.jsp?sid=1&id=308&pid=295&lng=en (2 of 3) [31/03/2010 12:57:23]
Ministry of Planning

foreign exchange and from the point of view of promoting import substitution products and export goods.
And in support of this point of view is the use of the state and in a broad approach of customs and quantitative
protection policies, in particular for consumer goods, as well as export subsidies that benefit exports through
export exchange rate changed.

3. Estimate the modified Iraqi dinar exchange rate for use in technical and economic feasibility studies and for (1,134) dollars per dinar. This price must be approved for 3 years until reassessed by the competent authorities.


http://www.mop-iraq.org/mopdc/index.jsp?sid=1&id=308&pid=295&lng=en
claud39
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The exchange rate of foreign currencies in economic feasibility studies Empty Re: The exchange rate of foreign currencies in economic feasibility studies

Post by RamblerNash on Sun Dec 22, 2019 10:19 pm

The exchange rate of foreign currencies in economic feasibility studies Spyder-win-20150818-135629_3_orig.jpg.cc1470897999ecb8adfcd420885b46af


3. Estimate the modified Iraqi dinar exchange rate for use in technical and economic feasibility studies and for (1,134) dollars per dinar. This price must be approved for 3 years until reassessed by the competent authorities.

Did you notice the difference between the image translation and the article translation?

I decimal point and a comma for the rate make quite a difference...
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