Dollar bonds .. a tool for financial liquidity Economic researcher Ahmed Hathal

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Dollar bonds .. a tool for financial liquidity

Economic researcher Ahmed Hathal
  
 http://economy-news.net/content.php?id=19378
Ahmed Al-Hathal *
Dollar bonds were used on an international scale, which are somewhat similar to public debt bonds and their repayment is done in dollars, and Egypt launched these bonds in (2018) at a value of (4) billion dollars in international markets for various periods (5-10-30) years, And their interest rates are close to the foreign borrowing interest rates offered by international financial institutions (5% -8%), which is expected to take an upward trend at that time, and economic researchers in Egypt confirmed that these bonds received increasing welcome and demand from investors, if they received Investors came considering that the price of the Egyptian bond is higher than the price of the bond on the US dollar Ki, which is expected to rise in that period, but Egypt was able to offer its bonds before the price of bonds rose on the US dollar and benefited from the timing.

In general, the situation in Iraq is completely different, because Iraq has financial sources from the foreign currency represented in dollars for rent, and this is what Egypt does not own, and the Ministry of Finance is the owner of the dollar when selling any barrel of oil that will be transferred into its account, and it has obligations (government purchases) that are deducted in dollars, The rest of it is sold to the central bank in order to pay the finance in dinars, as the sales of the Ministry of Finance to the central bank in (2018) reached about (52) million dollars.

The Ministry of Finance can use the part of the dollar oil revenue sources and benefit from local liquidity at the present time in exchange for selling part of the dollar to individuals and institutions instead of selling it to the central bank in the coming year, and the difference between the sale process will be with the term of payment in dollars, which is one year and is similar to the treasury bills from As for the period, and this process does not carry the public finance the burden of public debt and its effects and does not affect prices and inflation at the present time and may lead in the future to raise the value of the dinar, because the money obtained by the finance was previously created by the banking system and is within the framework of the offer of Criticism, and this effect will only structure.

So, internal dollar bonds are issued with a value of (20) billion dollars at a sale price (1150 dinars per dollar) for individuals and internal institutions to be paid by the Ministry of Finance in dollars, and the bonds will be a period of (one year), and the reason for this is that the M1 money supply (in its narrow sense) = (77).
From it to the public = (40) trillion dinars.
And from it deposits in progress = (37) trillion dinars.

So we have (40) trillion outside the banking system, and these bonds are offered to citizens and institutions to reduce hoarding, and because of the lack of accurate statistics to determine what is hoarded and circulating with the public, so some economists believe that there is more than (75%) of the money supply In its broad concept (M2), which amounts to (92) trillion is outside the banking system, and therefore suppose that the currency of the public in the concept of money supply (M1) is divided into two parts:

The first part: compactness = (20) trillion.
The second part: circulation = (20) trillion.
The focus is on the first hoarded part, the Ministry of Finance offers various bonds that start with a value of (50) million (dollar bond) and are done through government banks, and the dollar is paid after (one year) at a price lower than the parallel exchange rate (1200) and (1150) Dinars for every dollar.

Now suppose that one of the individuals has (50) million dinars (chunky), and one of the governmental banks offered him the dollar bond offer by (115000) thousand dinars for each ($ 100), and suppose that this individual accepted this offer and will buy the bond at its present value after (one year) ((Against his total amount paid to the bank 50 million) = (43,478) thousand dollars.
This amount will be obtained after (a year) in dollars at a price (1150) by one of the banks of the Ministry of Finance for (50) million dinars in which he previously bought the dollar bond.

What is the budget benefit and bond buyer?
The benefit will be as follows:

1- Fast financing for the budget deficit (after spending pressure), at a value of (20) trillion dinars through dollar bonds to be paid by the Ministry of Finance at a preferential price (1150).

2- We will exceed the international conditions and its political paper for the performance of the external debt and the resulting burden.

3- The process of transferring money from compactness will not affect the money supply until after a year, and it will be positive on the value of the national currency, by raising its value because there is a dollar offer greater than the demand.

4- The Ministry of Finance will lose some dinars for every dollar paid after a year, and individuals will pay at the price of (1150). Assuming that it was selling the dollar to the central at a price of (1170), the burden will be on the Ministry of Finance (20) dinars per one dollar, which is a very small amount that the finance will pay. the public.

5- The individual will gain the preferential dollar price through the difference between the purchase price and the selling price. For example, in our previous example, one of the individuals bought (43,478 $) thousand dollars for (50) million dinars, and suppose that the parallel price of the dollar after a year is (1200) dinars for each Dollars, this individual will win what is worth (2,150,000) (two million and one hundred and fifty thousand dinars), which is like an interest rate of approximately (4%) from the point of view of the dollar buyer, and is close to the price of monetary policy.

6- The effect of this process will be on the central bank, by reducing dollar sales to it by the Ministry of Finance in the coming year, which is due for holders of dollar bonds, but today we are experiencing a real crisis that cannot be directed towards external debt, but rather requires that we search for tools that achieve efficiency At the lowest costs, the central bank can boost the reserves through its financial and monetary investment operations at home and abroad, which amount to more than 85% of this reserve.

*Economic Researcher

Number of views 127 Add Date 03/21/2020

Edited March 22, 2020 by 6ly410