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Why is the project to delete zeros from the currency now? June 27, 2021 Ibrahim Al-Mashhadani After the Central Bank reduced the value of the Iraqi currency and the implications of this decision on the high level of prices and inflation rates in the economy and the deterioration of the standard of living of Iraqi citizens and the arrival of millions of people to the poverty line, there is talk about raising zeros from the national currency in a move to restructure the currency and thus raise a problem Controversy over the imminent implementation of this project, which was previously put forward by the Central Bank in 2005 and met strong opposition from those interested in economic and monetary affairs. It is indisputable that in 2003, Iraq inherited volatile economic and financial conditions and massive monetary inflation as a result of wars and the economic blockade that led to negative effects on the regularity of the commercial market, labor and production markets, and a deteriorating standard of living that generated many distortions in structures and economic relations, among which was the presence of a large monetary bloc Low-value zeros are not commensurate with any developments in the present and future of Iraq. For example, the value of the largest currency rose from 25 dinars to 25000 dinars, which requires in this situation to find exits for these situations and their remnants. It is necessary, as we discuss this controversial project, to point out that monetary policy is the first task of the Central Bank, just like fiscal policy as a tool of economic development and economic stability in Iraq. From this point of view, reducing the monetary mass is one of the manifestations of this policy, not as a policy isolated from economic activities. The other, rather, it is an essential part of this system that aims to improve economic performance, but its effectiveness and success depends, among many things, on the existence of an efficient regulatory and administrative system for the governmental and private banking system, capable of studying and analyzing all the factors that directly and indirectly affect the determination of the mechanisms of this project. Ranth and adjust the rhythm. The implementation of this project requires an in-depth study of the reality of the economy in the current circumstances before taking hasty action, especially if we know that one of the requirements of such a decision is to provide stability in price levels, political stability, moderation in inflation rates and an effective productive sector, all of which are not available at this stage, add to This is because deleting zeros and reducing the monetary mass as any major operation will undoubtedly leave negative effects and fear among institutions and parties that deal in cash, including: 1. Psychological effects of debt operations outside banks and the official money market that may lead, out of ignorance, to disputes that may lead to disturbances adding to the tense security situation. 2. Repercussions on the stock market, where the capital belonging to companies and individuals dealing with the market will decrease with the same percentages of zeros, which will have to close the market for a certain period for the purpose of issuing new share certificates. 3. The large sums required to print new currencies that can be employed in other fields are much needed, such as health services in the time of Corona, as well as education. 4. Raising zeros will lead to a decrease in the nominal value of the income of workers in all sectors, even if it retains its real value, a condition that precedes the drop in prices that often come late From the foregoing, and in order to create the appropriate environment for deleting zeros, the central bank must take into account a package of measures, foremost of which is restoring the dinar exchange rate to its previous era in order to eliminate the reasons that led to raising the value of the dollar in preparation for the stability of the currency value and price levels and reducing inflation rates while curbing financial speculation carried out by private banks owned by influential parties, in addition to building foreign reserves supporting the Iraqi dinar, which is a cover for the Iraqi currency, and improving and rebuilding the payments system in connection with the future of economic development and its real and nominal data. It is very necessary to gradually build this promising project away from seasonality and urgency.
Will Iraq succeed in overcoming the financial crisis by deleting 3 zeros from the local currency? July 12, 2021 http://iraqnews.info/wp-content/uploads/2021/07/%D8%B9%D9%85%D9%84%D8%A93-600x380.jpg Iraq News: A proposal was recently re-submitted to delete 3 zeros from the Iraqi currency to provide a monetary value in the Iraqi market with the aim of facing the financial crisis, which began with the outbreak of the Corona virus last year and the decline in global demand for oil, which represents approximately 91% of Iraq’s financial imports . With the rise in oil prices globally, the government is planning long-term financial strategies that may protect the country from the risks of falling into a financial crisis that may be more effective. Among the most prominent of these strategies was put forward by the appearance of Muhammad Salih, the economic advisor to the Iraqi Prime Minister, and is represented in deleting 3 zeros from the Iraqi currency, without specifying a date for the implementation of this step. Saleh says in a press interview, that deleting zeros from the Iraqi currency requires the fulfillment of two conditions, the first is price stability within the country, which means the stability of the dollar exchange rate against the Iraqi dinar, which is still witnessing relative volatility after the Iraqi government decided to raise the value of the dollar at the beginning of this year . As for the second condition, Saleh adds, it is represented in the stability of political life inside Iraq, which is required to change the exchange rate from laws and political consensus and so on. And about the importance of the deletion process and the extent of its realism, Saleh indicated that the Central Bank of Iraq has developed a project to delete 3 zeros from the Iraqi currency, the subject of research and study for a long time. The Iraqi economist, Khalifa Al-Zubaidi, says that deleting zeros from the local currency without feasible and effective economic reforms in all economic sectors will be negative and have no positive impact on the national economy and does not contribute to reducing inflation, although it may delude some that prices have decreased and that the purchasing power of the currency I got better. He points out that the Netherlands succeeded in this work in 1960 because it established a strict policy to control prices and liquidity. Turkey also succeeded in this measure, with the testimony of the International Monetary Fund, for taking effective measures in the fight against inflation. International dealing in the Iraqi currency is not related to the number of zeros as much as it is related to the strength of investments inside the country and the size of the Iraqi product exported abroad. In the opinion of Professor of Economics at the Iraqi University, Abdul Rahman al-Mashhadani, that deleting zeros will save the state the costs of transferring the Iraqi currency between the central bank and government and private banks.