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Deleting currency zeros throughout the history of the world .. Will Iraq join the list?
Baghdad / Obelisk: The economic expert, Salam Sumaisem, said that the government is now obliged to reduce the value of the Iraqi dinar against the dollar in order to obtain greater quantities of Iraqi money against the dollar without printing more, and thus preserving the currency from collapse.
In an interview with the "obelisk", Sumaisem said that in the pre-2003 era, the currency was printed without cover and in large quantities, and it was reduced without a balance. Today, it can be reduced with a balance, indicating that this reduction increases the amount of exports because it pays people They import from abroad to the demand for local goods, which will lead to a devaluation of the currency and the demand for it becomes more.
Several countries resorted to writing off zeros of their currency, with the aim of restoring some confidence in the national currency by trying to absorb inflation represented by high prices and the erosion of purchasing value.
And deleting zeros from the currency is the process of replacing the old currency with a new one whose price is less than the old currency by the number of zeros that will be deleted, for example deleting three zeros from the Iraqi currency means that one dinar from the new currency is equivalent to 1000 dinars from the old currency.
And if Iran was the latest country to write off the zeros of its currency to restore confidence in the national currency by trying to absorb inflation represented by high prices and the erosion of purchasing value, then dozens of countries preceded it to measures of this kind that have exceeded the number of 70 since the mid-twentieth century.
Let us know the most prominent of these cases
On Monday, the Iranian parliament responded to a bill approved by the government of President Hassan Rouhani at the end of July 2019, and referred it to the Shura Council for many months, as it was subjected to extensive debate and conflicting opinions about the feasibility of a step of this kind, as an official at the Central Bank confirmed that deleting the zeros is supposed That it is contingent on controlling inflation first, warning that the possibility of an increase in the prices of goods and services is present, as well as the possibility of the return of zeros after several years. The government at the time decided to delete 4 zeros from its deteriorating currency and replace the riyal with the Toman in transactions, and this was approved by Parliament, but it is not The first time that Tehran deleted zeros, in 2017 the central bank had to delete one zero, but this time the decision means that one million riyals will be equal to 100 riyals only.
Multiple studies indicate that cases of deleting zeros from currencies have exceeded 70 since 1960, including cases carried out by 19 countries that got rid of zeros from their currency at once, and 10 countries resorted to this step twice.
Venezuela, Brazil, Argentina, and Bolivia The Iranian decision comes at a time of great deterioration of the riyal, as a main result of the severe sanctions applied by the administration of US President Donald Trump, which have found deep resonance in Venezuela, which is also subject to harsh sanctions. In the first stage of a recovery plan launched by President Nicolas Maduro, to issue the sovereign bolivar by deleting 5 zeros from the old currency.
As for Brazil, between 1930 and the beginning of the twentieth century, it got rid of 18 zeros in 6 batches, the most prominent of which was in 1993, when it suffered severely from the acceleration of inflation to the level of 2000% and eliminated 3 zeros.
Also, the recurring economic deterioration in Argentina led its authorities to take decisions to write off zeros from its currency 4 times.
Bolivia also got rid of its zeros twice. Turkey, Iraq and Sudan replaced Turkey the old currency by canceling 6 zeros starting in 2005 with a decision issued in 2004, so that one million pounds became equal to one lira, and it was withdrawn from circulation, and instead new currencies without zeros were introduced in the name of "New Lira" before the name was re-approved. The lira "separately, and it gave citizens 10 years to exchange their old currencies for the new currency from the headquarters of the Central Bank.
In Iraq, in 2014, it was proposed to delete 3 zeros from the dinar, but in 2015 it was announced that a new denomination of 50 thousand dinars would be printed instead of deleting the numbers from the 1000 and 10 thousand dinars denominations. Sudan also removed two zeros from its currency in 2007.
Zimbabwe This country deleted 3 zeros from its currency in 2003, and after only about 6 years had passed, it decided to cut 12 zeros, which practically means that every trillion Zimbabwean dollars became equivalent at that time to one Zimbabwean dollar!
Former Yugoslavia, Serbia crossed zeros in 5 batches, while the Netherlands deleted 4 zeros from its currency after it issued in 1960 paper currencies with very large numbers, and Ukraine resorted to deleting zeros 3 times, as did Russia, Poland, South Korea and Ghana.
09/26/2020 Looks like another proposal to delete the zeros again - DWS112
This just came out today. Good or bad news?
A billion may become an alpha .. What does it mean to delete countries zeros of their currency? August 5, 2018
Sunday, 05-08-2018 at 09:11
Haneen Yassin - Gulf Online
On August 20, Venezuela will be on a date with the cancellation of 5 zeros of its currency, in an attempt to adapt to inflation expected to reach 1 million percent this year due to the steady deterioration of the country since the collapse of oil prices in 2014, making it unable to maintain Its socialist economic system.
But, what does it mean to cancel zeros from the currency? Has Venezuela ever taken this step? And what their feasibility and repercussions on the economy of the country and the citizen? .. "Khaleej Online" in the context of the following report in response to these questions.
The deletion of 5 zeros from any currency means that one million of this currency after the abolition of zeros will become only 10, and when the cancellation of 3 zeros will become 1000 and so on, and follow this procedure when the value of the currency collapses and their purchasing value is limited or not.
The most striking example of the collapse of the local currency is what happened in Zimbabwe. The last coin was worth $ 100 trillion, and that value did not buy a parsley package because of the inflation rate of more than 1000% 2009 and its replacement in US dollars and the South African Rand.
Venezuela has eliminated currency zeros in several countries. Zimbabwe has eliminated 3 zeros from its currency in 2003, Sudan has eliminated zero in 2007, Bolivia has eliminated three zeros in 2008, Romania has removed four zeros from its currency in 2005 and Turkey has written off six zeros from its currency in 2005.
But deleting zeros from the currency if not accompanied by economic reforms, it will not change anything, it is not much different from adjusting the size of the banknotes or changing their colors, or add a new fee or remove a picture of them.
Perhaps the most important experience in the deletion of zeros from the local currency was Turkey, with intentions in neighboring Iraq also, the two countries faced many problems and difficult; because of inflation and devaluation of the currency. The following is a review of the stations of these trials.
13 years ago, on 1 January 2005, Turkey announced the abolition of 6 zeros from its local currency (Lira). Inflation in the country has forced it to print large numbers of its currency and high values since 1981.
The currency of the value of 20.000.000, which used in Turkey the largest paper currency in the world, and create a number of zeroes large problems in transactions, for example became difficult to read the numbers of taxi counters, and the price list of goods, in addition to the serious arithmetic errors that resulted from the number of large zeros .
According to statements by the current president Recep Tayyip Erdogan, in March 2008, to enter the toilet in Turkey before 2005, the Turkish citizen had to pay one million pounds, to turn this figure currently to one pound only.
The effect of canceling the six zeros from the Turkish lira was positive in terms of price stability, and the inflation rate fell to one percentage point.
But the deletion of zeros was not the only reason for the low inflation, it was accompanied by economic stability of the country, and the reform plans included most economic sectors, which led directly to the fight against inflation.
After Turkey's inflation rate was 70.8% in 2002 before the AKP came to power, this rate was 15.39% last July.
During the period of the total siege on Iraq between 1990 and 2003, a stifling Iraqi economic crisis emerged. The collapse of oil exports, the deterioration of industrial and agricultural production, the rise in unemployment and inflation, the non-payment of foreign debts and the chronic deficit of the state budget.
Therefore, it was obvious that the exchange rate fell sharply until the exchange value of the dollar reached 3000 Iraqi dinars in 1995.
Because of this situation, it was necessary to issue new cash classes, whose nominal value reached 250 dinars, but in fact only worth 25 fils of dinar value during the 1970s.
When the United States occupied Iraq in 2003, and the collapse of the value of the Iraqi currency continued, the denominations of cash 5, 10 and 15 dinars without real value and there is nothing to buy them, so the country was quick to solve the problem by issuing new categories of its currency are 50, 250, 500 and 1000 and 10,000 and 25,000 dinars .
The decline in the value of the currency and the issuance of new categories of them, the instability in prices and problems of exchange, buying and selling, and in the presence of a large block of cash, the number of papers 4 trillion paper, and worth more than 30 trillion dinars in various categories.
Therefore, the Central Bank of Iraq announced in 2011, that will be deleted 3 zeroes from the Iraqi dinar, in order to strengthen the value of currency and reduce inflation.
The deletion has not been implemented so far despite the announcement of Ali Alaq, Governor of the Central Bank of Iraq, in late 2016, that it will be early 2017, stressing that this support for the Iraqi dinar and make it a competitor to foreign currencies, pointing out that this project "strategic" will serve the economy of the country; The dinar will be included in the global basket of currencies in vital stock exchanges, he said.
"If the process is not accompanied by clear economic plans and reforms, I think it will not work, and there are many experiments in recent years that have proven," says economist Ahmed Musabah.
"Turkey's experience in this area was successful. People had to pay several million lira to buy bread in early 2000, so Ankara decided in 2005 to delete 6 zeros from the Turkish lira," he said.
Musabih pointed out that the deletion of zeros in Turkey was accompanied by plans and reforms covering most economic sectors, which led directly to the fight against inflation.
In contrast, the government of Zimbabwe decided to remove three zeros from the national currency (dollar) when inflation reached 1000% in 2003, but did not adopt sound economic plans and reforms, continued high inflation, which ended the destruction of the economy of the country and the devaluation of the local dollar, About the country in 2009.
Musabeh believes that removing zeros from the currency would have costs that could be burdensome for a country suffering from difficult economic conditions.
These costs include raising prices in shops and restaurants, creating problems in fixing prices, raising the costs of issuing new currencies, and decreasing exports due to sudden appreciation of the national currency.
To remove zeros, Mabahib said, a positive sign is the simpler implementation of financial transactions, the strengthening of the national currency and its value relative to other currencies, the ease of access to international credit, the restoration of identity and confidence in currency, the reduction of inflationary pressures, the control of the currency market and the government's overexpenditure .
Iraq buys 48 tonnes of gold
Leila Ahmed Announced the World Gold Council (WGC) for the purchase of the Central Bank of Iraq's 48 tonnes of gold during 2014, bringing the Iraq reserves of gold material and contribute to the diversification of its reserves.
In an interview with Radio Free Iraq, the economic advisor to Prime Wazzramzar Mohammed Saleh importance that Iraq diversify its reserves of gold and the dollar so that the cover of the Iraqi currency, pointing at the same time that the states do not prefer gold much of the difficulty of his investment and the cost of flooring that paid for the country equipped fees. Saleh pointed out that gold typically constitute 6% of central bank reserves of hard currency, noting that "48 tonnes of gold at the moment, a gold in the bank the amount is sufficient and commensurate with the hard currency reserves."
It is believed a member of the Parliamentary Finance Committee MP Ahmed Rasheed flesh to buy this amount of gold may be used by the central bank as a cover for the new currency, which purports Bank issued and is also used as a cover for the process of deletion of zeros from the Iraqi currency. Rashid pointed to the current financial situation does not encourage the purchase of larger quantities of gold material.
To that count economist Bassem Jamil Antoine purchase this large gold "good gesture to diversify currency amounts and not limited balances at the central bank on the dollar only", pointing out that gold is one of the balances guarantor of the Iraqi economy, which contribute to maintaining the value of the Iraqi dinar .
The CBI had announced in 2013, on his quest to find a balanced ratio of gold with hard currency reserves, saying that as the size of the reserve increases less than the contribution of the other ingredients.
It is noteworthy that the International Monetary Fund said in 2012 that Iraq had boosted its gold reserves to reach more than 31 tons, explaining that Iraq bought 23.9 tons of gold in the month of August of the same year.
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