Deleting 3 zeros or printing 100 thousand dinars denominations ... Experts determine the best to reduce the repercussions of changing the exchange rate - urgent

by **claud39** on Sat Jan 09, 2021 5:15 pm

Deleting 3 zeros or printing 100 thousand dinars denominations ... Experts determine the best to reduce the repercussions of changing the exchange rate - urgent

Jan 9,2021

Deleting 3 zeros or printing 100 thousand dinars denominations ... Experts determine the best to reduce the repercussions of changing the exchange rate - urgent 144735

Baghdad today - special

A few days ago, two proposals have been put forward to reduce the effects of the devaluation of the dinar against the dollar, which was determined by a decision of the Ministry of Finance to fix the exchange rate at 1470 dinars against the dollar after it stabilized for more than 15 years, up to 1200 dinars, which caused bad effects on citizens, raising the prices of basic materials and reducing the value of salaries.

Parliament finances clarify its position

A member of the Parliamentary Finance Committee, MP Abd al-Hadi al-Saadawi, revealed, on Saturday, his committee’s opinion about deleting 3 zeros from the Iraqi currency, according to the proposals presented.

Al-Saadawi said in an interview with (Baghdad Today), that "the monetary policy in Iraq is one of the exclusive powers of the Central Bank and the financial policy is subject to the authority of the Ministry of Finance and the government, which is concerned with it, and it is not from the powers of the House of Representatives and the Finance Committee, meaning that changing the exchange rate or removing zeros from the currency is not relevant." By the House of Representatives absolutely. "

Al-Saadawi added, "We do not see any tendency at the present time to delete zeros from the Iraqi currency by the central bank," pointing out that "even the exchange rate of the dollar is subject to the powers of the central bank and was recently raised after a decision within the bank, and if the government has another opinion about the exchange rate, then this matter." Up to her

Expert: There are pros and cons

In turn, economist Safwan Qusay said in an interview with (Baghdad Today), that "there is no urgent need to issue a new paper currency with a denomination of 100 thousand Iraqi dinars or more, and that the proposal to delete the zeros requires a bank effort and withdraw the circulating currency."

On the other hand, he added, "the level of circulation of the Iraqi dinar is very easy, therefore printing a large currency in denominations of 100 thousand Iraqi dinars or more will facilitate the process of large financial exchange," noting that "the responsibility and task of issuing these categories of currencies rests with the Central Bank."

He continued, "The process of issuing money needs a financial cover in hard currency or gold, in addition to the market’s need for time to absorb the level of devaluation of the local dinar that the government has recently undertaken."

Qusay pointed out that "the step of deleting zeros from the currency raises the level of confidence in the dinar and reduces the burden of transferring money as well as calculations, but conducting it now may confuse the market because it needs to withdraw the dinar from traders and inject a new currency."

Turn

Earlier, the former budget director at the Ministry of Finance, Hazem Hadi, confirmed that the devaluation of the local currency in the country caused a shock in the market, while the shock that occurred was necessary to finance the budget deficit instead of endangering state sovereignty, as he described it.

Hazem Hadi said, in a televised interview with (Baghdad Today), that the advantages of the financial budget for the next year are "saving money and avoiding borrowing, because the size of the debt to Iraq has become very large and reached 160 trillion dinars, including internal and external loans."

Hadi added, "The internal debt decreased automatically with the rise in the value of the dollar against the dinar," indicating that "the shock that occurred in the market was inevitable, because covering the financial deficit by borrowing includes major disadvantages, including the loss of state sovereignty."

He pointed out that "the failure of the economic policy in the country in the past years has made Iraq a market for imported goods and the Iraqi market has been flooded with these commodities, and also led to a decrease in revenues due to the decline in the price and production of oil, and all these factors caused a major financial crisis for the Iraqi economy."

Since the collapse of oil prices earlier this year, Iraq is facing an unprecedented liquidity crisis, the government of Prime Minister Mustafa Al-Kazemi has had to borrow from the reserves of the Central Bank to pay nearly $ 5 billion a month, representing public sector salaries and pensions.

The Iraqi local markets in Baghdad and other provinces have been turbulent since last week, after the decision to devalue the currency to compensate for the deficit in the 2021 budget.

The decision sparked a wave of anger in the Iraqi street, but Al-Kazemi defended his government's move and said that he had two options: "Either the collapse of the regime and enter into complete chaos, or we enter into a Caesarean section for reform."

Al-Kazemi cited during his speech at the Iraqi Council of Ministers session held last Saturday, in several countries, including South Korea and Singapore, when they had previously taken "difficult decisions" in order to reform the economy.

https://baghdadtoday.news/ar/news/142267/A