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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 .
The central bank project to delete the zeros will be implemented in early 2017 Last updated 10/11/2016 And independent Iraqi news agency and /. X The governor of the Iraqi Central Bank, on Thursday, said the project to delete the zeros will be implemented in early 2017, indicating that the bank began to develop the first steps of the project. Keywords and said that " the goal of deleting three zeros from the Iraqi currency is to support the Iraqi dinar and make it a competitor of foreign currency," returned him as "that strategic project will serve the country 's economy." he added that " the Bank is working on the mechanisms in place towards the implementation of this project is expected to commence by the beginning of 2017 , " noting that " the central bank began the first steps of the project through the selection of designs, companies and the country that will be done Print currencies. " He noted that" the introduction of new currency does not mean the destruction of ancient coins , but it will continue to trade to about ten years , "pointing out that" this period will enable the central bank to withdraw the old currency in accordance with the mechanics will maintain market liquidity. " Finance Committee and was in former House revealed, (2013 August 15), the postponement of the process of removing zeros from the currency until after the next parliamentary elections, while confirming that the government is demanding guarantees for non - substituent currency back to the markets and forge. the Central Bank of Iraq confirmed, in the (April 25, 2013 ), that there is no intention at the moment to restructure the currency and delete the three zeroes of them, denying the reports in this regard. it is note worthy that the General Secretariat of the Council of Ministers announced (April 12, 2012), for the patient in the application process of deletion of zeros from the national currency, which had to be stop all procedures related to the transaction mentioned until further notice. It is noteworthy that some economists believe that Iraq is not formatted for the time being to delete the zeros from the dinar, pointing out that the deletion needs to be a security and political stability as well as economic stability. www.ina-iraq.net The Central bank: the project to delete the zeros will be applied beginning of the year 2017 Tomorrow Press / BAGHDAD: The governor of the Iraqi Central Bank, on Thursday, that the project to delete the zeros will be implemented in early 2017, indicating that the Bank embarked on the development of the first steps of the project. Keywords and said for “tomorrow Press”, “The goal of deleting three zeros from the Iraqi currency is to support the Iraqi dinar and make it a competitor of foreign currency “, he returned him as” that strategic project will serve the country’s economy. ” He added that “the Bank is working on the mechanisms used to implement this project is expected to start by the beginning of 2017,” noting that “the central bank began the first steps for the project through the selection of designs, companies and the country that will be done printed currencies “. He pointed out that “the introduction of new currency does not mean the destruction of the old currencies, but it will continue to trade to about ten years,” pointing out that “this period will enable the central bank to withdraw the old currency in accordance with the mechanisms will maintain market liquidity. ” The Finance Committee in the House of Representatives earlier revealed, (August 15, 2013), the postponement of the process of removing zeros from the currency until after the next parliamentary elections, while confirming that the government is demanding guarantees for non-substituent currency return to markets and forgery. The Central Bank of Iraq confirmed, in the (April 25, 2013), that there is no intention at this time to restructure the currency and delete the three zeroes of them, denying the reports in this regard. It is noteworthy that the General Secretariat of the Council of Ministers announced (April 12, 2012), for the wait in the application of the process of deletion of zeros from the national currency and that require action to stop all associated with the operation mentioned until further notice. It is noteworthy that some economists believe that Iraq is not formatted for the time being for the deletion of zeros from the dinar, pointing out that the deletion needs to be a security and political stability as well economic stability. Alghadpress.com
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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