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The Exchange Rate of Foreign Currency in Economic Feasibility Studies


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It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc.

 

•Estimate the amended exchange rate of the Iraqi dinar to be used in technical and economical feasibility studies and for (1.134) dollar per dinar. This price should be approved for 3 years until re-appreciation by the competent authorities.

 

 

The justifications to call for the use of an exchange rate that is lower than the official exchange rate are:

 

 

 The use of an exchange rate that is lower than the official rate is the appropriate action at the investment planning level to translate the country’s economic strategy aiming at stimulating central investments in the sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of domestic production base in order to reduce imports and compensate it with local commodities. This helps to reduce reliance on foreign exchange earnings from crude oil exports and increases the share of non-oil sectors in the local production.

 

This is what I get out of this.

 

They are saying that the official exchange rate is 1 dinar = $3.208 and that they can sustain that rate, but the problem with that is that the locally grown and made products would be hard to sell (ie: tomatoes, olives, dates, cars) by keeping a lower rate, it keeps the products that they produce cheaper and grow the whole economy not just the oil sector.

In Canada we do the same thing to create as many jobs here and increase exports. It also is good for the tax base of the country.

So what they are suggesting is that they use the rate of 1 dinar = $1.134

In the short term it creates employment, but long term they want a super strong economic base to be able to withstand any economic down turn.

 

The local sector/economy/jobs is the more important than the oil.

Edited by deniscanada
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also i forgot to add.

 If that they are saying in this article is correct. They are NOT NOT GOING TO FLOAT THERE CURRENCY AT LEASED NOT FOR THE FIRST 3 YEARS. IT WILL BE FIXED.

After 3 years they will reevaluate and increase the currency to that they call (the normal rate) to 1 Dinar = $3.208

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also i forgot to add.

If that they are saying in this article is correct. They are NOT NOT GOING TO FLOAT THERE CURRENCY AT LEASED NOT FOR THE FIRST 3 YEARS. IT WILL BE FIXED.

After 3 years they will reevaluate and increase the currency to that they call (the normal rate) to 1 Dinar = $3.208

I completely agree! I think you nailed it!

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"Below are the central controls related to the exchange rate of the foreign currency to convert the project inputs and outputs from foreign currency to its equivalent in the local currency, and that is by calculating the net discounted present value standard and the internal return on investments in economic analysis that governs investment projects that costs excess one million dinars."

 

 

This feasibility study was not done for the purpose of revaluing the dinar.  It was done for planning of investments.

 

"<>2.Justifications for exchange-rate adjustment: there are a number of important and powerful arguments which support the view that the official exchange rate reduces the real value of foreign currency for purposes of calculating the economic national profitability for investment projects and hence for the purposes of investment planning. It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc."

 

 

They do seem to be acknowledging that they will use this rate for three years or until the CBI reappreciates the dinar.   

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This feasibility study was not done for the purpose of revaluing the dinar. It was done for planning of investments.

So what is your point?

 

This deals with small business to Billion $ business. Its investing in the county as a whole.

even McDonalds, Wallmart, Target, 7/11 ect ect. all started with one store.

 

This is a country that basically has nothing. Investment is in everything.

Agriculture, manufacturing, retail, wholesale, service industry, hotels, restaurant, truism, mining

just to name a few. whether its small or large the economy must grow. They need to invest in everything.

 

There are many articles that talk about loans and investing to any Iraqi that want's to start a business.

 

If there is unemployment under 8%, and thousands of new businesses. They can tax the people and business.

Its all part of the economy, and the GOI makes lots money and that is the goal.

 

When you look at a Picasso you don’t only just look at the signature, You look at the whole picture. His autograph may be worth hundreds but his painting are hundreds millions of $.

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This is a country that basically has nothing


Read more: http://dinarvets.com/forums/index.php?/topic/151334-the-exchange-rate-of-foreign-currency-in-economic-feasibility-studies/page-2#ixzz2WKy0jJU3

 

 

You can't be serious? Your going to come on the number one dinar site on the web with 

 

the most well versed laypeople around and actually claim that Iraq has nothing. I needed 

 

a good laugh.  :lol:  :lol:  :lol:

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The date of the article is of some importance, but the numbers used in the study are of utmost importance. The numbers are realistic and not pie in the sky. 

The arguments in the article and fellow members represent rational thinking.

We wait for all things to come to pass.  (as usual)

 

Go RV!  :soon:

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All I can say is....WOW! I have been prepared all along for only a 10 cents revalue. Now, I am actually imagining it at these rates mentioned. Thank you greeneyedlady for sharing! WOW....can you imagine it revaluing at 3.208?! It's so exciting to think about that I am lost for words, lol.

 

 

All this good news calls for a pre-Ramadan RV!!

 

Who's in?

 

:bravo:


I'm in!! Go RV!!!!!!

Edited by saradise
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The article from 2009 was posted here in 2009 by THJ:

 

http://dinarvets.com/forums/index.php?/topic/2878-iraqi-news-mop-chief-talks-about-economy-and-politics/?hl=%2Bexchange+%2Brate+%2Bforeign+%2Bcurrency+%2Beconomic+%2Bfeasibility+%2Bstudies

 

Posted 30 December 2009 - 05:21 AM

 
The Exchange Rate of Foreign Currency in Economic Feasibility Studies

Below are the central controls related to the exchange rate of the foreign currency to convert the project inputs and outputs from foreign currency to its equivalent in the local currency, and that is by calculating the net discounted present value standard and the internal return on investments in economic analysis that governs investment projects that costs excess one million dinars.

Estimate the shadow price of foreign currency:

1. It is necessary to put central controls to amend the official exchange rate * to reflect the shadow price of the foreign currency, and that is considered one of the necessary requirements to implement the net discounted present value standard and the internal return rate on investment in the economic calculation stated in the instructions, paragraph nine.

The central controls for adjusting market prices distinguished a group of outputs and inputs traded internationally, where the projects production or usage of them is reflected on the abundance of foreign currency in the economy and thus project outputs or inputs used of such are considered purely foreign currency outputs or inputs.

* What is meant by exchange rate: the number of units of foreign currency, expressed in dollar per one dinar.

In particular the following outputs and inputs of foreign currency were distinguished:

� Export-outputs.

� Outputs marketed locally that substitute imports.

� Imported inputs.

� Inputs produced locally that usually go to exports.

Foreign labor.

According to the pricing rules the value of the output and input (traded) is calculated using export prices (FOB) and import prices (CIF), according to what is listed in the pricing rules.

In other words the pricing rules calculate what the project produces from foreign currency (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 currency, as well as what the project uses from foreign currency and imported inputs multiplied by the import price (CIF) in foreign currency .... etc.).

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

2. Justifications for exchange-rate adjustment: there are a number of important and powerful arguments which support the view that the official exchange rate reduces the real value of foreign currency for purposes of calculating the economic national profitability for investment projects and hence for the purposes of investment planning. It is demonstrated in this context to call for assessing the dinar for less than (3.208) dollar (official exchange rate) when assessing project outputs and inputs of traded goods of exports, substitute imports and imports... etc.

The justifications to call for the use of an exchange rate that is lower than the official exchange rate are:

� The use of an exchange rate that is lower than the official rate is the appropriate action at the investment planning level to translate the country�s economic strategy aiming at stimulating central investments in the sectors that encourage the development of non-oil exports, as well as sectors that encourage the expansion of domestic production base in order to reduce imports and compensate it with local commodities. This helps to reduce reliance on foreign exchange earnings from crude oil exports and increases the share of non-oil sectors in the local production.

� The application of the amended exchange rate on project imported inputs will assist in directing investments away from aggregated sectors dependent on imported inputs and the preference of those sectors that rely on locally produced inputs.

� The use of the amended exchange rate helps to correct the balance in favor of the traded goods sectors compared to non-traded goods.

� The real exchange rate has declined rapidly since the early seventies, through rapid rise of the level of prices and local costs which led by the steadiness of the official exchange rate to change in prices and actual local rate costs that gave an advantage for imported goods at the expense of locally produced goods, meaning that it led to deterioration of the competitiveness of alternative replacement goods and export commodities.

� This action shows that the official exchange rate overestimates the value of the dinar, compared to the foreign currency and from the promoting goods substituting imports and export commodities point of view of.

And in support to this view is the state�s utilization and in a broad approach to the customs and quantitative protection policies especially for consumer goods, as well as export subsidies that exports have through an amended export exchange rate.

3. Estimate the amended exchange rate of the Iraqi dinar to be used in technical and economical feasibility studies and for (1.134) dollar per dinar. This price should be approved for 3 years until re-appreciation by the competent authorities

Read more: http://dinarvets.com/forums/index.php?/topic/2878-iraqi-news-mop-chief-talks-about-economy-and-politics/#ixzz2WOmHz0K7

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Also in "The Future of Iraq Project " by the US state dept.  . It said it was imperative that the Iraqi dinar returned back to the value it was before the war and it gave the example of 1 dinar = 1 dollar .  To me that's a pretty solid document . It may not have been a directive but Iraq has been trying to follow it since 2003 I think . So I agree this MOP Feasibility Report is very encouraging and solid imo...

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So it seems like they want the rate to be from $1-$1.15 , to start and if this was done in 2009 just think of all the progress with the oil production,bank reserves, gold , DFI fund and investments over the last couple of years!!  :twothumbs: Looking more like its coming together!!

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Let me make something a little clearer.  I do not know when this study was done.  I know it is not the same study done in 2009 by the Minister of Finance.  The other thing that I notice was the last statement.

 

"This price should be approved for 3 years until re-appreciation by the competent authorities.'

 

They are saying that the adjusted exchange rate will be used until the CBI re-appreciates the dinar.  Basically they are saying that the value used by the CBI is not the true value of the dinar, but we have known that for a long time.  Even the IMF has said the dinar is undervalue.  The IMF has said that the dinar needed to be on par with the dollar and that was back a few years ago.

http://www.mop.gov.iq/mop/index.jsp?sid=1&id=308&pid=295&lng=en

 

This is where this feasibility study is located.  The one done in 2009 was on the Minister of Finance website and disappeared a long time ago.  I have not checked lately to see if I could find it, but found this one last year when I was looking for the other one. 

Thank you. I think they are also saying the authorities are not competent. We already knew this. "This price should be approved for 3 years until re-appreciation by the competent authorities.'

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