6-7-2012 Scooter-EG: Central Bank of Iraq said that "international sovereign Iraqi bonds issued under the Paris Club granted a higher interest rate / not specified / purchased at prices which makes it expensive compared to the rest of the sovereign bonds rose for the rest of the countries that confer benefits by about 2%." That higher interest rate is key to attracting the big industrial type investors that extra 2% becomes critical in the long run when you're talking about Billions of $$$$ it's also interesting that they are leveraging the paris club agreement and here's why. That debt relief took out 80% of the debt from the debt paying countries remember the arab states really never adopted the Paris Club Agreements and still hold Iraq accountable for the much of the their sovereign debt but here's the interesting part. Those countries like the US, Western European nations, etc. will now be able to earn an extra 2% perhaps that was part of the overall package with the Paris Club members. I like that plan a lot Here's the other important part, "The current account surplus in the balance of payments amounted to about Iraqi 10% ratio to GDP (national income)." Stressing that "this will enable the dinar rate of improvement because of the trend towards the adoption of central bank monetary policies successful." The Surplus in the Balance of payments SURPLUS equated to 10% in essence they aren't really running a deficit at all these days So if Iraq's GDP is 100 Billion -- rounding off to make this easy A cool $10 billion is accounted for as a surplus. Remember how countries gain wealth they do it by exporting the wealthier they become it's the countries that import more than they export that tend to get themselves into trouble unless they have huge domestic consumption which Iraq does not. They need to stablalize the prices and oil will need to stay at the current prices to continue this growth and according the IMF recent presentation in Tokyo, Oil is not going downward in the long term. If a currency jumps 20% over five years that's very significant and also I was using a simplistic model it didn't account for all the variables remember whenever a currency moves one PIP it runs through an algorithm that calculates over 1200 different measurements just to move that one pip. PIP = Percentage Interest Point. Also, what would happen if they put a 1.5% to 2.5% daily lock on the currency for the first 24 months In essence, the currency could only advance 2.5% a day. That may not seem like a lot but it grows fast if that were the case. I'm the absolute wrong person to ask about the political environment in Iraq. I think we are heading for a Hybrid solution between the redenomination and the strategic goal of the country to increase the purchasing power of the people. A process that will take time. They will come out with the lower denoms first and maintain the fidelity of the larger notes. Suck those larger notes into the CBI and then slowly progress with moving the pricing to reflect the new CPI at the same time they launch their primary bond market and attract the big boy investors. At the same time take those surplus budget residuals since 2006 and parlay those into miniture economic explosions in their primary vertical markets like Agriculture and mfg. Investment in items that get that young populace working and spending once those occur or at the same time. They gradually bring or raise the value of the dinar with the bonds from foreign investors and their primary stakeholders providing the day to day liquidity and leveraging the growth markets that start to add to their GDP. That's what I think will occur. What they will open up at, nobody knows but it should be interesting. Ithink when we see the lower denoms floating into the market and being used exclusively by the people of Iraq, you'll see several significant jumps in the value. Largely because they'll need this to reflect the purchasing of common items food, milk, bread etc.
|
|
|
|
