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A NEW RATE !!!!


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The Kurds have announced a currency at 1228 IQD per USD !!!!! That is a reduction of 3.1 %... WHY did they do that ??  I think Because they need DOLLARS. AND maybe this will get some out of the mattresses. But will the citizens take the bait ?

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5 hours ago, rockfl9 said:

The Kurds have announced a currency at 1228 IQD per USD !!!!! That is a reduction of 3.1 %... WHY did they do that ??  I think Because they need DOLLARS. AND maybe this will get some out of the mattresses. But will the citizens take the bait ?

 

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If you read the latest Economist posts it should be evident that the solution to the only solutions are to get rid of 20% of employees or change the rate to get 20% more dinar per dollar. They need a rate of at least 1500:1 . or both.

The economist proposes a rate of 2000:1 and to use the excess to fund revenue producing projects to absorb unemployment . That is an IDEAL solution BUT it will require Iraqis to take some PAIN for 2 or 3 years.

Kazimi cant do that without the help of parlament and I dont think that  will be easy.

 

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  • 2 months later...

There is a RUN on the dollar in Iraq.!  

The borrowing law isn't  working because the GOI's credit line is gone. So they must balance the budget with MATH.

Either cut expenses { mainly salaries } by 35%OR INCREASE the dinar exchange rate by 30%..It seems the IMF review suggested an increase to 1450 but I think that required cutting other items also .

We know Iraqi's are holding a lot of dinar in there homes , fearing the loss in the exchange rate they are paying a premium for any available dollar forcing the rate up. Maybe buying Euros also.

Before this there was a simple trade in dollars for a small commission .  But now PANIC buying has set in.

Cutting salaries and subsidies will be hard to swallow but they can be restored  gradually when oil comes and it wont hurt the poor as much.  A sharp increase would be a disaster to the entire economy and wipe out many iraqi's savings with a permanent

loss in the confidence of the CBI and banks in general. 

STAY TUNED.

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No pp, all you big boys and girls have to make and be responsible for your decisions. 

I want to offer my opinion.

Iraq has run budget deficits for the last 5 years. This budget deficit, based on last years numbers, is the biggest yet AND  there is no one left to borrow from. The numbers are real , in dollar terms $81Bn in expenses and $50bn in revenues. That's a $31Bn deficit , money they don't have.

If they choose not to adjust salaries or the exchange rate ( or both ) the only option is to take the dollars from the CBI ( a fake loan ) and put the problem off to next year. Hoping that the price of oil will go up drastically. Predictions are that WONT happen. With that big a debt International  

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Whoops!

International ( think USA)banks will not deal in dinar.  Dinar dealers may drop like flies unless they have other sources of income.  Total debt will become at least $150Bn. 

Also  when they compute oil revenues at $42 it means that Brent crude is selling at $50 . There is a average $7 production delivery cost and a slight discount because it is not full Brent quality,

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Dinarians should not feel too bad , it seems that Iraqi Economists can't do math either.

2 dinar per dollar after drop the zeros to be $0.50 !!! .  1000 new dinar would be $500 .  NO PROFIT.

Once the dinar starts to devalue Iraqi's will want dollars more than ever. But where will those dollars come from , the upply is limited. In order to get new dollars the CBI will have to use its account at the NY Fed and have them flown into the country at the cbi expense. Why would it do that ?

 

 

 

 

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Iraq has to do this now or it will be put off until next December and be worse. A devaluation is the only solution .  But the good result is that Iraqi's must find a way to be more self sufficient and not rely on oil.  Electric cars are in.  The need for gasoline is going away . Solar and wind will provide more electricity.  

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The idea that the GOI  would fake a devaluation to collect IQD in country is rediculous.  the only way that works is for the CBI to sell dollars from the reserves. there is NO GAIN for the bank! It needs to keep all the dollars. 

This will be a good lesson in Central Banking.

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THIS IS THE RESULT OF THE NEGOTIATIONS WITH IMF.  Set a new rate 1450. Plus a few other things like reduce headcount,  cut subsidies, eliminate entitlements, etc and we will give a new line of credit for $XXBn.

SO .  new rate set , check .Eliminate new  appointments (jobs)  small check .  The MOF doesnt need parlament to approve these.   The other things like changing the existing salaries, eliminating entitlements , cutting subsidies , dada , dada ,etc. 

require parlament approval and they probably have additional time to do. 

That will be a big problem.  The  deputies will have to be educated.

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Dinarians are a THICK headed bunch.

The only bad thing about the new rate is it may not be enough,.  if the budget is not approved ASAP the conditions will get worse. They need everything to click off Jan 1. If they delay till after the elections ( that is if they can have an election this year). It will take a new rate of 1600 to correct the damage.

for oil to get to only $80 the whole world will have to return to pre-pandemic conditions. Bes estimate now is 2024. Iraqs oil revenues will remain flat. 

I know it will be hard to swallow but them's  the facts.   

This is not a fake move to get Dinar out of the "mattresses" .  Iraqi's are not a well educated bunch in financial matters .

Over years the GOI of the day have appeased them with jobs and higher wages.  Kazimi and the current council are the first to realize things are out of control.  Hope it is not too late.

Take your losses now or hold and take them later. 

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4 hours ago, rockfl9 said:

I Know.  But maybe this time is different.  This time the MOF can say if not done NOBODY gets paid !  Without these changes and no loan Iraq is TOAST.

It will be interesting to see how the GURUs go from here .  Kinda quiet so far.

I'm sure they will find a way to spin it.  Cash Reserves are reported to be at 15% not much talk about this either

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I am amazed.  A devaluation hits them in the face, the GURUs tell them it is a GOOD thing and they believe it !!!!!!

This is not a temporary thing .  It was broadcast in the WHITE paper. I am surprised the Kazimi team actually pulled it off without a committee.  Now we need to see how the rank and file Iraqi's take it ?

Will they suck it up OR will we have protests and riots? 

A disruption to the oil flow will make things worse.

Anything brought into the country must go up 20%. plus any tarrifs that apply.    

Will it only make the corruption worse,

PLUS with everything taking more Dinar they  must print more . I expect to see a 100K note . 

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