The beginning of the end for the currency window

[yota691]

Private and difficult exam

 2023/07/31

 

 

Yasser El-Metwally 

 

Is the Iraqi private sector ready to assume the responsibility of giving it a role in managing the economic file for the next stage? Exam!. In order to answer this question, a quick review of the distortions in the structure of the Iraqi economy is necessary, as the data indicate that the foundations for the correct transition from the totalitarian approach to the free approach were not adopted.

 

The constitution approved the adoption of a market economy, while totalitarian laws still prevail. Or rather, the totalitarian mentality still prevails, so these distortions and the difficulty of achieving economic reform emerged, regardless of which of the two approaches is best suited to clarify my impartiality in the analysis.

 

Here, on the economic page in particular, since the beginning of the change, I wrote dozens of articles on the importance of giving a role to the private sector in managing The economic file in light of the data of the transition, but to no avail. 

 

Now, we notice during the term of Al-Sudani’s tenure as prime minister that interest is emerging on the surface, as he, that is, the President, held meetings with many elites representing the private sector in reference to acknowledging the importance of the private sector in finding a solution to the structural distortions that afflicted the economy, including those related to addressing Thorny files that the state is unable to solve in isolation from the private sector, and among the most important and complex of them is the rampant unemployment problem.

 

This approach and the end of it was the meeting of the President of the Iraqi Economic Council, and it was fruitful because Al-Sudani listened to the most prominent challenges that hinder the private sector in highlighting its required role at this stage and promised to overcome them I say that this trend is the most prominent at this stage. But the question that arises here is; How can these challenges be overcome?

 

 The answer is definitely by adopting decisive and binding decisions, legislation, and procedures, and these require an understanding between the legislative and executive authorities to facilitate and approve them in accordance with the supreme interest of the country.

 

Here, I would like to point out that Al-Sudani’s initiatives in this direction are messages of reassurance to the private sector about the government’s seriousness in supporting the private sector, as it realizes that problems cannot be solved without an active role for the private sector.

 

Here I must point out that it is necessary to note the recent meeting of the delegations of Iraq and Jordan in Baghdad has resulted in important agreements, the most prominent of which is the responsibility of the private sector between the two countries.

 

It is remarkable that the Jordanian Prime Minister fed his official government delegation with a number of active Jordanian private sector representatives, and this context is adopted in most countries of the world except in Iraq, which rarely follows this method. Here, it must be emphasized that any Iraqi delegation in the future must include representatives of the private sector who are real businessmen with experience and not hold the capacity of a businessman.

 

And if the costs are not accounted for by the allocations of government delegations, the representatives of the private sector are able to bear their travel expenses, especially since the economic feasibility of such trips or delegations and delegations is present. 

 

Now it is possible to answer my question about the extent of the private sector's readiness for the difficult test. We have a prestigious private sector that is known for its experiences in the completion of important projects in the country, and these are the ones who represent the real private sector, and accordingly we build hopes and their readiness is present, provided that they are supported by legislation or laws that guarantee their rights. 

 

We reflect well on this unfamiliar approach in previous governments, and we keep our eyes on the results, and we follow up and evaluate to see.

[yota691]

Towards a new global financial system

Economical  2023/08/08

 

 

Yasser El-Metwally 

 

The world is preoccupied these days with the acceleration and development of events, especially the BRICS group's preparations for holding its conference scheduled for the middle of this month.

This comes amid speculation that the new BRICS currency may be approved as a competitor to the dollar in commercial transactions and global monetary reserves.

Here, the debate revolves around whether the BRICS group was able to extract the dominance of the dollar in world trade and compete with it.

The BRICS group includes China, Russia, India and Brazil, which was formed in 2009 and a year later, in 2010, South Africa joined it. This economic bloc is important because it constitutes 44 percent of the world's population and 30 percent of global production and aims to abandon the use of the dollar in exchanges Commercial is a new unified currency for those countries.

It is worth noting that the dollar is the only currency traded in commercial exchanges since World War II.

What are the reasons for this bloc?

Most experts and locals unanimously agree that America's strict policy in its dealings with countries and its imposition of continuous sanctions has prompted these countries to think and search for a way to get rid of this hegemony.

Reports based on facts on the ground indicate that there are 19 countries, some of which have expressed their desire to join this bloc, led by Saudi Arabia, Egypt, Turkey, Iran, Mexico and Indonesia, and some of which are monitoring and interested in developments.

 It is expected that the Brex Group will discuss its conference, which will be held during these days the possibility of opening the acceptance of states' requests for membership of this bloc, the foundations, procedures for joining and issuing a unified currency. 

And if the publication of the BRICS is approved, what is the effect of this in the domination of the dollar?

To show the impact of this currency, it is necessary to track the impact of the euro currency approved by European countries in the year 1999. It achieved 36 percent of the global currency reserves, and the dollar share, which was 90 percent of the global currency reserves, has reduced.

Expectations indicate that the BRICS will acquire more than 30 percent of the global monetary reserve at the beginning of its launch at the expense of the dollar in commercial transactions around the world, and you can imagine the size of the impact in reducing the role of the dollar in the future and on the medium and long term.

From here, the picture becomes clear that the expectations of experts towards a new financial and economic system will inevitably come, and it is based on the diversification of global monetary reserves to limit the dominance of the dollar. Questions and debate will continue until the new system’s working mechanisms are launched.

What we care about here is where is Iraq from these developments?

Here I would like to point out that the interest of those countries in their local currencies and their pride in them encouraged them to stand up to the power and dominance of the dollar in controlling their destinies, and although the BRICS will compete with the dollar and reduce its value in commercial transactions, they cannot completely remove it from the scene, and for this there are many reasons. The government must pay attention to these developments and changes that occur in the global system and the need to draw up a balanced policy to deal with future expectations, with certainty that the Central Bank of Iraq closely monitors these developments and collects and analyzes information.

Here, we call for the importance of working on adopting the idea of diversifying the monetary reserve due to its importance in preserving the future of the country's economy.

[gregp]

The dollar is corrupted by years of disappointing government officials. 

[md11fr8dawg]

We all feel your pain gregp! It's always right around the corner, this country or that country is pulling the strings, it will be 1st quarter of 23, no watch june, no July for sure (that one is gone too) now it is for sure by the end of august. No seriously, GUARANTEED!! and very SOON we will find out that is BS. But hey, one thing that has increased in the last 16 yrs of this investment is patience and a healthy skepticism and the gleaning of the valuable info I have received from this site while waiting and knowing one day this investment will return a substantial ROI. The only question that remains is, will I or any of us here be alive to see it and if we are, will we be able to even enjoy it!

[yota691]

The relationship of the exchange rate with the power of the economy

Economical  2023/08/21

 

 

Yasser Al-Mutwali

believes that the general public, who are not specialists in economics and finance, believe that the criterion for the strength of a country's economy is the exchange rate of its currency against the dollar, or any other currency or means. While most economists in the world unanimously agree that this theory is not valid, we are often faced with a question; Does the value of the currency reflect the strength of the economy of that country.

What concerns me as a specialist in economic affairs is to show the reality of the strength of the Iraqi economy and that the fluctuation of exchange rates does not mean the reality of the country's economy, as financial and economic experts agree that the exchange rate for any currency is an accounting number agreed upon between global central banks and does not reflect the strength of the country's economy .

To analyze the facts of this theory, let's take a comparison between the Saudi currency and the Jordanian currency, to verify the correctness of the theory from its error.

With regard to the Saudi riyal, for example, (one dollar equals 3.75 riyals), 100 dollars equals 375 riyals), and as for the Jordanian currency (one dollar equals 70 piasters, every 100 dollars equals 70 Jordanian dinars. The question is: Does this mean that the Jordanian economy is stronger
than The Saudi economy?

 

Of course not, because the volume of Jordan's GDP is 50 billion dollars, while the volume of the Saudi GDP is nearly a trillion dollars. From that we conclude that the exchange rate does not reflect the strength and durability of the economy. Therefore, fixed exchange rates are a purely administrative government decision, not It is related to the strength of the economy, and if we follow international experiences in dealing with the size of their currencies, Argentina, Turkey and Italy have worked to delete six zeros from their currencies, which is a treatment to regulate currency circulation and reduce its volumes in dealing, and this proves that the exchange rate is an accounting number, nothing more, and a government decision.

There are trends in some countries that work to liberate the value of their currencies by floating them because the exchange rate of the dollar is floating and liberalized, and here the estimates of governments remain with such a decision. Finance and economic experts attribute the reason for the floating to the inability to fix the exchange rate indefinitely, and this is related to the extent of economic and political stability.

The closest example of this is the Lebanese currency, in which the exchange rate has remained constant for decades, every 100 dollars equals 1,500 pounds, but it was soon exposed to chaos and instability until the exchange rate collapsed, unfortunately, which is what is happening to it now
.
In conclusion, the Iraqi economy is strong and solid, but the fluctuation of the exchange rate is caused by the political and economic instability in the country.

[yota691]

A specialist separates the relationship of the fluctuation of the exchange rate with the strength of the Iraqi economy

2023.08.21 - 11:23

 

Baghdad - Nas  

Economic expert Yasser Al-Mutwali said, on Monday, that the Iraqi economy is strong and solid, but the fluctuation of the exchange rate is caused by political and economic instability in the country.  

  

Al-Mutwalli added in an analytical article followed by “NAS” (August 21, 2023) that “the general public who are not specialized in economics and money believe that the criterion for the strength of a country’s economy is the exchange rate of its currency against the dollar, or any other currency or means, while most economists agree that The world is aware of the incorrectness of this theory, and we are often faced with a question: Does the value of the currency reflect the strength of the economy of that country?  

  

The specialist pointed out that "financial and economic experts agree that the exchange rate for any currency is an accounting number agreed upon between global central banks and does not reflect the strength of the country's economy."  

  

Al-Mutwalli gave an example of the Jordanian and Saudi economies, saying:  

  

Regarding the Saudi riyal, for example, (one dollar equals 3.75 riyals), 100 dollars equals 375 riyals), and as for the Jordanian currency (the dollar equals 70 piasters, every 100 dollars equals 70 Jordanian dinars).  

  

the question is; Does this mean that the Jordanian economy is stronger than the Saudi economy?  

  

"Of course not, because Jordan's GDP is $50 billion, while Saudi Arabia's GDP is nearly $1 trillion."  

  

Al-Mutwalli stressed: "From this we conclude that the exchange rate does not reflect the strength and durability of the economy. Therefore, fixed exchange rates are a purely administrative governmental decision that has nothing to do with the strength of the economy."  

  

He also added: "And if we follow international experiences in dealing with the size of their currencies, Argentina, Turkey and Italy have worked to delete six zeros from their currencies, which is a treatment to regulate currency circulation and reduce its volumes in dealing, and this proves that the exchange rate is an accounting number, nothing more, and a government decision."  

[yota691]

International Center for Finance and Trade

Economical  2023/09/13

 

 

Yasser Al-Metwally 

 

Finally, the dream has become a reality after the announcement of the establishment of an international center for finance, trade and business, beginning its first step by choosing a distinguished location by transforming one of the Sulaymaniyah malls into a financial center that carries out a major activity in coordinating investment and financing activities in particular.

The Central Bank of Iraq announced its intention to establish an international financial and business center during the last banking conference held last June.

 

I mentioned in a previous article, here in Al-Eqtisadiah, the title: The Financial Center: A Dream or Reality?! It seems that the Kurdistan Region hastened to establish this center in Sulaymaniyah Governorate, with the initiative and support of the private sector through one of the largest companies in it. To demonstrate the importance of this center, we must address To experiences in our regional and Arab surroundings,

 

The International Financial Center in Dubai brings together most of the buildings of financial institutions and companies, including banking, stock exchange, insurance, and some banking companies and other financial sector belongings, in addition to offices for companies and businessmen.

 

You can imagine the volume and ease of interconnected transactions that are intertwined in many businesses and tasks. These institutions are also equipped with the latest global and technological technologies that we are now striving to possess, even if we are lagging behind in this amazing development. From here, the importance of establishing this center emerges, similar to what exists in... neighboring countries .

 

The advantages of the center are wide and numerous and important in stimulating financial investment and quickly providing various services needed by beneficiaries, including businessmen, investors and bank customers, due to the ease of services provided as a result of the close distances, their electronic connectivity, and alleviating the routine of transactions between institutions.

 

This center is considered one of the important economic centers in the country and the largest attractor of investments. It is also secured by a high-quality security team that cannot be penetrated within the complex.

 

Now, this center has begun to take vigorous steps as a nucleus towards implementing the vision of the Central Bank of the importance of establishing an international center for finance and business in the capital, Baghdad. It is considered an advanced step if the center began its first work by obtaining a green light from His Excellency the Governor of the Central Bank of Iraq, who pledged to support and encourage this trend as a nucleus for the future of the main center. It is planned to establish it in the rest of the governorates, especially in Baghdad, and a solid cooperation agreement was signed 

With the Securities Commission. 

 

Thus, this center will contribute to providing regular services to the financial and business sector and will contribute to expanding and strengthening development programs that require coordination to achieve broad investment flows, as it is considered a center for attracting these investments through the institutions active in it, which is one of the requirements for attracting investors.

 

While we refer to this proactive initiative, we await the greatest dream of establishing the mother center in the capital, Baghdad, due to its importance in the investment flows that the country needs for construction and development.

[yota691]

The beginning of the end for the currency window

Economical  10/11/2023

 

 

Yasser Al-Metwally 

 

We have always followed the decisions and actions taken by the Central Bank in its monetary policy, and here on the economic page of the morning, and since the work of the window, that is, since it announced the start of a currency auction, until the present day, and we have monitored the positive and negative effects of it and diagnosed them in many of my articles here, and we were convinced of the necessity of letting monetary policy take its own path without... Parliamentary and governmental interventions through statements from some non-specialists.

 

Now that the Central Bank has been able to prepare the appropriate ground for leaving the currency auction or window, which in previous periods helped overcome liquidity crises that almost destroyed the value of the national currency.

 

After completing the use of the electronic platform in its correct form, even if there are comments searching for convincing and non-justification solutions, the time has come to dispense with the window and transfer the process of financing foreign trade through banks through their correspondents abroad, thus lifting the guardianship cover from private banks for reasons that were related to their performance. Now we are required to track the advantages of this measure, which is scheduled to be implemented early next year.

 

The first advantage is that this measure restores to banks their role and responsibilities in providing banking services, which is the goal of their establishment. Secondly, this measure will limit the monopoly of government banks and their acquisition of trade financing. Thus, this measure will contribute to assisting absent government banks in foreign trade financing operations and generating a competitive banking market. It will also help in concentrating capital in the hands of private banks, enabling them to raise their capital from one billion to 400 billion, and enhancing their credit capabilities to contribute to the process of economic development. This is an important goal in itself, but the most important question remains: What about the 14 sanctioned banks and the other 4 banks sanctioned before them?

 

We believe that the Central Bank must help these banks to enable them to return to practicing their banking activities. However, these banks are required to improve their performance by adhering to the conditions and controls of the Central Bank that are consistent with the requirements of international standards required to practice banking activity in order for them, too, to be able to meet the requirements for raising their capital. A question remains. Another important thing: What is the impact of closing the currency window on providing the liquidity required to cover the operational budget requirements?

 

We understand the measures taken in light of this question, but what is important is to inform the public of the mechanisms for dealing with this aspect and dealing with the effects before they occur, and thus spreading the culture of how to deal with decisions to deal with crises in a shock manner until prices stabilize.