Exchange rates and foreign investments

by **Ponee** Fri Mar 16, 2018 6:09 am

In light of the current globalization system in all countries of the world, and the liberalization of the bulk of global trade, and in light of the movement of money and international currencies between the countries of the world in line with the movement of international trade between countries, the acquisition is the term reserve and facilities for these activities and linked to the equation of return and risk, Money is moving among countries for investment, so there is a so-called foreign investment.

And that one of the main risks to investment is the so-called exchange rate among them in the world, because what matters to foreign investors is to ensure that the loss due to instability of the exchange rate (the so-called evaporation of the actual value of the currency) and thus non-operating losses that may result in revenue or Due to the decline in exchange rates between them.

It is also known that the exchange rate is the rate on which the exchange of foreign exchange is based on the national (local) currency, the number of monetary units in which a unit of local currency is exchanged to another foreign currency.

The exchange rate in any country is directly linked to the reserves of foreign currencies in question, and therefore its close correlation with the volume of export activity of any country (because foreign exchange earnings).

The balance of payments balance (the balance of foreign trade and the balance of current transactions) is very important. The deficit in the trade balance necessarily leads to a decrease in the exchange rate. Therefore, the stability of the exchange rate is linked to the export rate of any country in the world export trade volume and hence its foreign exchange income. Will be available to them at any time.

This stability leads to stability in production inputs and products, as well as reducing inflation and stabilizing interest rates. It has a direct impact on the profitability of export industries and the cost of imported resources.

Hence, it is important to make the exchange rate stability a tool for controlling foreign trade in order to attract greater volume of foreign direct investment, because the reassurance of global investors on their capital and financial assets from the risk of erosion is a major attraction for these investments, as well as length of investment possible.

However, it is also necessary to bear in mind that the exchange rate is not a tool independent of other factors in the economy but that all macroeconomic policies must be consistent with one another, and the need to continue to direct the exchange rate to a uniform price between the official market and the parallel market .

* President of the Association of Iraqi private banks link

03.13.2018