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How is the exchange rate stable?


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How is the exchange rate stable?

Sunday 12 September 2021 323How is the exchange rate stable?

Yasser Al-Metwally 
The exchange rate of the dollar against the dinar stabilized at a price of 148 thousand dinars compared to the 100 dollars against the official price after raising it at the price of 145,000 dinars, and it is still slightly high.
The question is what is the reason behind this stability?
I see that the main reason behind this stability is due to the application of the theory of supply and demand for the first time in Iraq.
The effects of the inflation that occurred due to the sudden change in the exchange rate became evident on the reality of the standard of living on all members of society without exception, even in varying proportions.
And the poor segment was the most affected, and then followed by the middle class of retirees and employees, who are the vast majority in the country.
One of the effects of inflation is the clear deflation, as the demand for most commodities decreased and cast a shadow on the market.
Thus, there was a somewhat slowdown in the import process due to the weak demand, followed by a slight decrease in the demand for the dollar, so you find price stability evident these days.
The objective of controlling the outlets and preventing the import of some commodities may have other partial effects on the stability of prices.
This reality brings us back to the concept and role of consumer culture in the process of balancing prices in the market, how?
If we have the ability to adopt a consumer culture that limits the apparent wastefulness in our consumer behavior, we will contribute to maintaining price stability. This means that government measures alone are unable to control the pace of prices unless accompanied by a balanced consumer culture by sacrificing some needs for a while, which will limit the The huge demand for hard currency with the aim of stabilizing the price and reducing it to less than the official rate.
The second thing that will help to stabilize the exchange rate is for government agencies to control currency smuggling, and this matter needs great capabilities.
Regarding the return of the official price to its previous era, I do not see the possibility of this in the short term. Rather, it needs time until the government controls the payment of its debts and the monetary reserve remains at the internationally accepted limits.
For this, the citizen must deal with this reality and arm himself with a solid consumer culture that helps him and the state to achieve stability.
We are also approaching a new stage after the elections, even if the picture is not yet clear until a new government is chosen and awaits its economic program, which will define the features of the stage and allow economists and analysts to determine the stages of stability and propose solutions to return prices to their previous era and stability to become parallel to the value of the Iraqi dinar.
Waiting for how things will turn out, then every incident will have a talk, we will watch to see.
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20 hours ago, yota691 said:

We are also approaching a new stage after the elections, even if the picture is not yet clear until a new government is chosen and awaits its economic program, which will define the features of the stage and allow economists and analysts to determine the stages of stability and propose solutions to return prices to their previous era  

"  We are also approaching a new stage after the elections  ", sounds too good to be true, but for now on, let's wait and see how it turns out.


"  return prices to their previous era  ", just wonders what previous rate  would that be? 3.22 usd? i still have a doubt that they will return the rate to 1190.

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The yuan and the dollar

Sunday 19 September 2021 201The yuan and the dollar

Yasser Al-Metwally 

China said that the world should prepare from now on to buy our goods in Chinese yuan, and the decision will be implemented after a month.

This remarkable early warning raises several questions, including: Will the yuan affect the value of the dollar? Or, in other words, will the Chinese currency replace the US currency?
It is known that global trade as a system through which the global market deals in dollars (fixed pricing), and on this basis, economists find it difficult for the Chinese yuan to replace the dollar or affect its value in the short and medium term.
This came during a discussion with someone in this regard, but he added that the Chinese yuan could affect the value of the dollar in the long run.
I found in this vision tangible facts on the ground, based on the speed of economic growth that China is leading over all global economies, and if this growth continues at a rapid pace as it is happening now, the yuan may outperform the dollar in the long run.
I find here in the Chinese decision and its new approach that it used its cunning in order to raise the value of its currency (the Chinese yuan) by imposing its currency in trade exchange operations, and thus will create a price balance with the dollar in the medium term.
The reason we expect the yuan to be able to compete with the dollar in the long run is that it follows the transactions of the oil market globally until China is able to contain all oil-exporting countries in accepting cooperation in the Chinese yuan, of course it needs a period of time, if it manages to acquire the oil market, and this depends Who will win the big fight next?
What is the extent and size of the implications for the Iraqi economy?
The percentage of Iraqi trade dependence on Chinese goods and commodities is
 75 - 80% of the Iraqi market imports. This means that the impact of the Chinese decision to impose its currency will be the largest on Iraqi trade. In other words, the demand for the Chinese yuan will rise to the equivalent of the dollar, or they will gradually share the demand for them between the short and medium term stages.
Here, those in charge of monetary and fiscal policies must take into account the extent or size of the impact on the national economy as a result of this sudden decision, so as not to enter into the cycle of providing the two currencies in parallel with the demand for them.
The private sector, with its commercial and banking sectors, will be the one that will be most affected by this transformation, and it has to deal with the expected effects of this measure.
I expect that if the Chinese decision is implemented so quickly, it will cause chaos in the Iraqi market at first, and it is required to address it in advance.
For this reason, we said that Iraq needs to diversify its dealings with the countries of the world according to its interests; Because the struggle of adults continues in all aspects of life, and we have to play with adults.
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