Tishwash: Removing zeros from the Iraqi dinar is back in the spotlight..Strengthening the currency or just changing its form?
Talk has returned again about the process of removing zeros from the local Iraqi currency, as the Central Bank of Iraq confirmed that the project to remove zeros from the dinar is subject to continuous review and study.
Countries remove zeros from their currency to revalue their national currency and simplify financial transactions. This is done by removing a specific number of zeros from the nominal value of the currency, making it appear less inflationary and more stable.
The central banks of these countries usually issue a new currency, equal in value to one hundred thousand or one million of the old currency, with the old currency gradually being withdrawn from the markets, after a period in which the two currencies are allowed to be used side by side. The most famous countries that have implemented this process, more than once, successfully were Turkey and the former Yugoslavia.
In his statements, Ali Mohsen Al-Alaq, Governor of the Central Bank of Iraq, considered that the bank responded to global economic challenges such as rising energy and raw material prices by amending some monetary policies in line with the international situation and to enhance confidence in the Iraqi dinar and prevent a sharp decline in its value.
Al-Alaq pointed out that the Central Bank of Iraq increased its holdings of foreign exchange and gold reserves to strengthen the country’s financial position and stability, in order to enhance its ability to confront potential economic crises.
Commenting on this, economic researcher Ali Daadoush said in an interview with Al-Mada, “The process of deleting zeros is linked to the Central Bank of Iraq,” indicating that “the issue is not new and was previously discussed about 14 years ago. “
Daadoush pointed out that “the process of deleting prices is psychological, as the commodity worth a thousand dinars will be worth one dinar and remain at the same value.”
The economic researcher pointed out that “removing zeros leads to flexible dealing with the local currency and strengthens it, and may lead to increased production and diversification of the economy, and thus enhance the value of the Iraqi dinar.”
For his part, economic affairs expert Mustafa Hantoush said in an interview with Al-Mada, “The issue of removing zeros from the Iraqi currency is only arithmetic and keeps the currency at the same value. That is, when you sell a house for 100 million, it will be sold for 100 thousand.”
Hantoush added that “countries resort to deleting zeros when there is an expansion in the value of the printed currency and problems occur in the book value and accounting entries, for the purpose of restoring accounting balances.”
The economic researcher went on to say, “Iraq is currently suffering from problems with the exchange rate,” indicating that “the value of printing and replacing the currency costs Iraq time, effort and millions of dollars.”
Hantoush said, “The situation now requires focusing on how to maintain the value of the Iraqi currency against foreign currencies.”
According to the latest data, the Central Bank of Iraq’s foreign reserves cover 83.62% of the broad money supply, which covers the cost of importing 15 months, while the global standard rate is 20%, covering 6 months of importing.
Foreign exchange reserves are a tool used by all central banks to maintain the stability of the local currency exchange rate against foreign currencies, as well as to reduce exposure to external crises by maintaining liquidity in foreign currency to absorb shocks in times of crisis.
The Iraqi currency is under great pressure, which has caused its price to decline against the dollar during the past period, including the increase in the Iraqi budget deficit. Two weeks ago, Mazhar Salih, financial advisor to Iraqi Prime Minister Mohammed Shia al-Sudani, said that Iraq will face a budget crisis in 2025 due to the decline in oil prices, the country’s main source of revenue. Salih said in an interview with Reuters: “We do not expect major problems in 2024, but we need stricter financial discipline in 2025.” link
************
Tishwaash: Iraq is close to completing its financial transfers electronically.. and the US Treasury reveals its economic growth rate
Prime Minister Mohammed Shia Al-Sudani received yesterday evening, Monday (Baghdad time), US Deputy Secretary of the Treasury Wally Adeyemo, and a number of officials in the Treasury Department.
According to a statement by the Prime Minister’s Office, a copy of which was received by {Euphrates News}, the meeting witnessed “discussing bilateral economic relations between the two countries in various vital sectors, reviewing the government’s efforts and plans for economic and financial reform, the move towards diversifying the sources of Iraqi output, enhancing development targets, and practical measures implemented in the field of combating money laundering.”
The Prime Minister stressed that the government has made great strides in the financial and banking reform file, and 95% of bank transfers have been completed through the electronic platform, and less than 5% remains to be completed by the end of this year, after which the transition to the correspondent banking system will take place, in accordance with the government’s approach and its commitment to raising the capabilities of Iraqi banks, in line with international standards and meeting the needs of the thriving investment environment in Iraq.
For his part, Adeyemo praised the progress witnessed by Iraq in the field of economic and banking reforms that were achieved in record time, and the state of economic growth that reached a total of about 6%, which enhances the government’s efforts in development, expressing his readiness to cooperate and work within a bilateral partnership that serves the interests of economic development. link
************
Tishwsh: Aramco begins issuing international dollar-denominated sukuk
Saudi Arabian Oil Company (Saudi Aramco) announced the launch of international dollar-denominated sukuk, starting from today, Tuesday, September 24, 2024, until October 2, 2024.
The minimum subscription is $200,000 and integral multiples of $1,000 in excess of that amount, subject to market conditions.
The nominal value of the offering is $200,000, and the return value and maturity period are determined according to market conditions.
This comes after Saudi Aramco announced its intention to issue international sukuk under the SA Global Sukuk Limited’s Trust Certificate Issuance Program.
The company said in a statement on the Saudi Stock Exchange (Tadawul) today, Tuesday, that the sukuk will be denominated in US dollars, and will be direct, priority, unsecured, with a limited right of recourse to the assets, which constitute an obligation on (SA Global Sukuk Limited).
The value of the offering will be determined based on market conditions. The net proceeds will be used for general corporate purposes of Saudi Aramco.
The offering is subject to regulatory approval and will be offered in accordance with Rule 144A/Reg S of the U.S. Securities Act of 1933, as amended.
The FCA and ICMA stability rules will also apply to the offering. An application will be made for the Sukuk to be admitted to the Official List of the FCA and the London Stock Exchange. The Sukuk will also be admitted to trading on the London Stock Exchange.
Saudi Aramco has appointed Al Rajhi Capital, HSBC, First Abu Dhabi Bank, Dubai Islamic Bank PJSC, Standard Chartered Bank, KFH Capital, Goldman Sachs International, J.P. Morgan and Citi as Joint Active Bookrunners to organize a series of fixed income investor meetings commencing on 21 Rabi’ Al-Awwal 1446H (corresponding to 24 September 2024G).
SMBC Nikko, Alinma Investment, Albilad Capital, MUFG, Abu Dhabi Commercial Bank PJSC, POCI Asia Limited, Emirates NBD Capital Limited, Sharjah Islamic Bank, Mizuho and Natixis have been appointed as Joint Bookrunners for the inactive subscribers.
The offering of these international sukuk will be limited to qualified investors in the countries in which the offering will take place, in accordance with the laws and regulations in force in those countries.link
