Thread: Iraq/Dinar News. 09/05 to 01/14/07

Check this out:

Dar Al Hayat

ANY TAKERS?

The Implications of the Improvement of the Iraqi Dinar Exchange Rate
Ali Mahmoud al-Fakiki Al-Hayat - 26/11/06//


The Iraqi dinar is witnessing a gradual improvement in its exchange rate these days. The price of the dinar has risen from $ 0.000676 in early November to $ 0.00069 later during the same month. This means that the number of dinars against one dollar dropped from 1480 dinars to 1440 during that period. It is noteworthy that the exchange rate in the 1970s was $3.20 for one dinar, which exceeds the current price by four thousand and six hundred times.
It seems that the Iraqi government is planning now to fix the exchange rate at 1000 dinars/dollars, which is almost one third. The government plans to make this gradual, in order to avoid a sudden rise. This was the lesson learned in the aftermath of the sudden catastrophic decline that had occurred among traders and businessmen in 1995 and the accompanying financial and commercial turmoil, bankruptcies and trade and banking collapses.
If the current rise of the exchange rate from 1480 dinars to 1000 dinars to one dollar is applied, some people in Iraq will gain while others will lose, as follows:
Losers:
A- Savers in dollar. Iraqi savers lost confidence in the dinar. This urged many of them to keep most of their savings in dollars. These include traders and industrialists. When they will need to convert their savings to dinars, the loss will be huge.
B- Contractors in projects priced in dollars: Those are paid in dollar, but the majority of their expenses and local purchases are usually in dinar. This includes the labor wages and their purchases of materials of local origin. This is the case with building and construction contractors who purchase local supplies and construction materials (bricks, soil, sand, gravel). When they submitted their quotations they had evaluated their contacting service at the prevailing exchange rate before raising the value of the dinar and now they have to pay at the new rate and hence lose. After they handover the projects, they will receive the rest of their money in dollars.
C- Lenders in dollar: They will regain their loans valued at less than the value before the rate of the dinar was raised.
D- Borrowers in dinar: They will pay their debts upon maturity in dinars of a dollar purchasing power more than that at the time of lending. They will have to pay in a dinar that exceeds the lending rate by almost one-third. When the major collapse happened in 1995, thousands of traders announced their bankruptcy while indebted to others, and this was disastrous.
E- Employees who earn in dollar.
F- Estate lessors with rental allowances in dollar while their expenses are in dinars.
G- Estate tenants who pay in dinar while their income is in dollar.
Gainers:
A- Savers in dinar, for being able to buy more dollars.
B- Employees and workers who are paid in dinar, since they will receive the same pay but with a more purchasing power and a better exchange rate.
C- Producers: since they will sell their products for the more powerful dinar.
D- Borrowers in dollar and whose savings are in dinar: since they will pay their debts and their interests in the cheaper dollar.
E- Retirees: they will have more purchases with the same salary.
F- Those covered by the program of the social safety network (the retirees themselves).
G- Estate lessors in dinar.
H- Estate tenants in dollar while their incomes are in dinar.
This means that raising the dinar exchange rate will benefit some and harm others.
It is noteworthy that the terrible continuous escalation in prices during the 1980s and 1990s of the last century in Iraq was not due to an increase in the value of money itself, but due to the fact that this increase was not met by a real balance or a strong national economy and national income or a supporting domestic product. When the State issued currency, it behaved like a merchant who issues instruments with no balance to meet their nominal value. Moreover, there were the constraints of trade and external transfer. Otherwise, the amount of money in circulation in a country like Japan is more than the amount of Iraqi currency in circulation (as an absolute figure).
During the post-war period, the balance was met, but the rise in prices was due to high costs and shortage of supply. For example, the average of the prices of Iraqi vegetables and fruit has increased this year by 100% as compared to the prices of 2005, but due to the shortfall in production. The agricultural expert Jaber Abu al-Eis (Ministry of Agriculture) says that the execution rate in the agricultural plan for 2006 amounted to 17%. The prices of local poultry products this year are twice as much as 2005. The reason was the banning of the poultry industry, among the procedures of combating avian flu and the prevention of the importation of these products from many countries. Moreover, it was due to the rise in the costs of energy, fuel and transportation costs to the double or even more. Also there are the imposed royalties paid by the importers, producers and transporters to gangs and bandits, including kidnapping payments and ransoms. There is also bribery, corruption and alliances between businessmen and government officials, in addition to the high wages, the rise in prices and interests of loans caused by the Central Bank. All these factors led to an increase in the cost of production and inflation rates. Such factors have to do with costs and supplies while they have nothing to do with demand. Thus, the saying, "Much money looking for a few commodities" does not apply here.
The current inflation is due to high cost and shortage of supply. Nowadays, the government ensured assets that cover the nominal value of money and a domestic product that supports it. But there remain two options. The first option is to increase the quantity (number of units) by a third, raise salaries and wages and expand and improve the miserable network of social safety to include additional numbers of extremely poor people living at half a dollar per day amounting to four million. The second option is that the government raises the dinar exchange rate by one third as it is planning now.
In the first case, the needy employees and workers who are not covered by social welfare will benefit, and there will be no loss or damage to other people. In the second case, employees, workers, retirees and others will benefit, but, at the same time, others will lose as mentioned earlier.
According to reliable sources, the second option comes in implementation of the directives of the International Monetary Fund.

SO NOW WE KNOW WHAT CBI IS DOING....

But, as we stated in a previous article, the former American Secretary of State, Henry Kissinger, described the IMF as "a doctor who has only one pill for every conceivable illness".
* Mr. Ali Mahmoud al-Fakiki an Iraqi expert in economics

NICE FIND JOLA!!! This will certaintly bring about a lively debate for an otherwise boring Sunday!

Cheers!
DayDream

Originally Posted by Dinar Duchess

Am I missing something here..... If they are going to support the unemployed with this enormous amount of money.... and also I see the salaries are increasing by up to 60% next January...... how does a reval fit in with this information..

Maybe it is me but first of all I think that when they RV the amount will be recalculate to it's proportions like the whole economy.

They have raised salaries in 2003/2004 and it only lead to inflation. They are now taking a lot of measures to curb inflation, economists and articles are stating that increasing salaries is increasing the inflations on mid-term/long-term.

I think about it this way:

Why 'creating inflation' if you are fighting inflation? Unless they all can back it.

Once they open the doors, the oil production will boost and the oil revenues will boost. With these revenues they will create jobs and decrease the unemployment so theire entire economy will be boosting.

So this will easily backup a 60% raise in salary in my opinion.

I wish I did not find that article....:(

1000/dollar does not do it for me...:(

Originally Posted by Jola

I wish I did not find that article....:(

1000/dollar does not do it for me...:(

No it doesnt does it, it just about repays my dealers premiums. But its better than nothing...... any improvement is good.....

Originally Posted by Trapper t

I think that the billion dinar would go alot further if they would just reval the darn thing!!!

Yawning/stretching...Just before I fell asleep at the keyboard early this a.m. I had posted that thing about the trillion 480 billion blah blah...and I had asked if anyone knew if, when they set the 2007 budget they also "ridered in" a clause adjusting the value of the dinar for these budgetary allocations because this is a LOT MORE money after a re-val and they had to have known they were going to do this eventually so how were they going to account for the differences in funding....???

Okay...someone has to have addressed this further ahead in the posting...I just never start at the end and work backwards...I love watching as the story unwinds - never read the last page of a mytery novel first of peek at Christmas gifts or - oh who gives a rat's a##! I'm gettin' coffee and OMG!!! If I'm this excited BEFORE coffee....!!! C'mon REVAL "dang" it! (it IS Sunday)

Originally Posted by Jola

I wish I did not find that article....:(

1000/dollar does not do it for me...:(

I am glad you found the article. Although, it brought my hopes down, it also brought me back down to earth, where I think I have needed to be for the past month. This article just makes me think, that I am again in it for the long haul....which is where my intentions where when I started investing. Although, secretly I am hoping someone here has a fascinating come-back!!

Jola Check this out:

Dar Al Hayat

ANY TAKERS?

The Implications of the Improvement of the Iraqi Dinar Exchange Rate
Ali Mahmoud al-Fakiki Al-Hayat - 26/11/06//


The Iraqi dinar is witnessing a gradual improvement in its exchange rate these days. The price of the dinar has risen from $ 0.000676 in early November to $ 0.00069 later during the same month. This means that the number of dinars against one dollar dropped from 1480 dinars to 1440 during that period. It is noteworthy that the exchange rate in the 1970s was $3.20 for one dinar, which exceeds the current price by four thousand and six hundred times.
It seems that the Iraqi government is planning now to fix the exchange rate at 1000 dinars/dollars, which is almost one third. The government plans to make this gradual, in order to avoid a sudden rise. This was the lesson learned in the aftermath of the sudden catastrophic decline that had occurred among traders and businessmen in 1995 and the accompanying financial and commercial turmoil, bankruptcies and trade and banking collapses.
If the current rise of the exchange rate from 1480 dinars to 1000 dinars to one dollar is applied, some people in Iraq will gain while others will lose, as follows:

Jola, this is a very good find. Yes this doesn't get where we want to go but it is moving in our direction. This is still a big move. I still believe we will see a nice return but we may have to wait until some time in 2007.

It is bugging me:

So now, Iraq will be open for foreign investment at a dinar exchange rate of 1000/dollar??

...cause if it is a gradual process, then probably the HCl and other laws will be passed during this time...

Does it make any sense - this adjustment of the exchange rate - besides being a move to fight the inflation at the moment?

Originally Posted by Jola

[B][COLOR="Blue"]The first political : Economists : the procedure is incapable of making a positive impact with the presence of high rates of inflation

Translated version of http://www.alsabaah.com/

وان قرار البنك المركزي الخاص برفع سعر الفائدة من 10 الى 12 في المائة جاء في محاولة كبح جماح التضخم، وأرى ان هذه الزيادة عاجزة عن احداث أي تأثير ايجابي، وهي غير مجزية، فالتآكل الذي يحدثه التضخم في رأس المال، اكبر من سعر الفائدة، وعليه فان هذه السياسة غير كافية في الحفاظ على القوة الشرائية للعملة العراقية.Although the Central Bank's decision to lift interest rates from 10 to 12% came in an attempt to curb inflation, I think that this increase is unable to make any positive impact, They are unprofitable, Valtakl impact of inflation in the capital. more interest rate, Therefore, this policy is not sufficient to maintain the purchasing power of the Iraqi currency.

Recently we read that the CBI raised rates to 16% so I believe this is old news....