KTFA:
Clare: Ziad Al-Hashemi, a researcher in international economy (Cambridge/UK) writes to Iraq Observer: Is it time to delete ?zeros from the Iraqi dinar
February 24, 2024 Opinions / Iraq Observer
The dinar and its three zeros - is it time to symak the dinar and return to the dinar 1980 Since the beginning of 2010, the talk within the Iraqi economic community has expanded about the zeros that burdened the dinar for nearly two decades, and the need to deal with them, and to rid the dinar and free it of the burden of heavy zeros.
The goal is (return to the value of 1980 dinar), like the issues and topics discussed and interacted by Iraqis, opinions have varied and differed between an enthusiastic supporter of deleting zeros and a hesitant and rejecter, and the .state of disparity continues to this day
The process of deleting zeros is related to replacing the old currency with multiple zeros with a new currency free of zeros.
In the case of the Iraqi dinar, for example, the prevailing proposal is to replace every thousand dinars of the current currency with one dinar of the new currency, and as is traded among economists in general and cashians in particular, the deleting zeros can achieve many benefits, the most important of which is getting rid of high inflation pressures on the economy and restoring confidence in the national currency and the monetary system as a whole, facilitating accounting processes and cash exchange between citizens, and reducing the cost of managing and maintaining the monetary block by reducing its .volume under circulation
These and other benefits have encouraged some countries to adopt the process of deleting zeros from their zero-sweaden currencies, in an attempt to get rid of the burdens of inflation, or to start a new economic page, going beyond the mistakes of the past.
According to some statistics, dozens of countries have tended to delete zeros, including countries in South America, Iran, Turkey and other countries in Africa and East Asia, and in total, we have 70 deletions of currency .zeros since 1960 until today Returning to the Iraqi situation, the huge accumulations over the past decades were the main and direct reason for the loss of the dinar of its value that it enjoyed during the seventies and eighties of the last century.
Some statistics indicate that the Iraqi dinar lost by 400,000% of its value between the years 1990- 2007, meaning that the commodity that the citizen bought for 100 dinars in 1990 became buying it for 400 thousand dinars in 2007, and this is a huge huge increase, which cast a shadow on the Iraqi markets and the Iraqi commercial movement, increased the pressure on public money, and ate from the value of the citizens' cash savings, or in other words, greatly weakened the purchasing power of consumers
Accompanied by this Continuing to print the currency and increasing the cash mass in circulation, which until 1980 did not exceed 25 billion dinars, to rise in the 1990s to 40 billion, then the huge jump came in 2003 to reach the cash mass to 6 trillion dinars and exceed 27 trillion dinars in 2010 until we reached the level of more than 100 trillion dinars, and the number is able to increase, and the 25 dinars note was the largest banknote in 1990
But today we have the categories of .25,000 and 50,000 dinars Because of the achievement of a kind of security and economic stability in Iraq supported by a strong financial position due to the large oil revenues that generated huge reserves of hard currency, a group of financial and economic experts believe that it is time to start to scalate the dinar and delete its three zeros, where the process (in their opinion) will achieve a lot of positives that the Iraqi economy needs, the first of which is the return of the dinar as a store of value, restore confidence in the monetary system, reduce the demand for hard currency and get rid of the phenomenon of dollarization that has caused the economy and squandered huge financial wealth.
With the process of of flining the dinar, the issued cash mass can be reduced from 100 trillion to 100 billion and this is a number that can be managed more Efficient and .less expensive Despite the validity and opponence of this opinion in many aspects, there are some issues that must be taken into account before making such a decision.
The process of deleting zeros will not provide a magic solution alone through which the Iraqi monetary system can get rid of inflation and cover behind a young currency without zeros. Experience has shown that many countries have not benefited sufficiently from the process of deleting zeros, as the value of currencies have deteriorated in some cases, and the new currencies have returned to accumulate zeros again, in an undoubted confirmation that the fight against inflation requires other more effective solutions that are applied in parallel with the process of deleting zeros
And from those experiences, the experience of Brazil Which has been deleting zeros seven times since 1930 and with a total of 18 zeros, and this country succeeded only in the attempt in 1993, when the process of deleting zeros was associated with an economic reform process targeting the roots and .causes of inflation
With a quick look, we find that the Iraqi economy still suffers from serious structural and structural problems, including the issue of high rent, the fragility of the non-oil sectors and the deterioration of their domestic product, and the lack of sufficient discipline in monetary and financial policies and the ambiguous relationship between the two policies, not to mention the obsolescence of administrative and banking systems and the penetration of corruption all joints and sectors of the economy, and other negatives, and until the process of deleting zeros is achieved,
it is important to precede the implementation of an effective economic reform program that re-engineers and structures economic sectors, accompanied by a review and evaluation of both monetary and financial policies and adjusting the relationship between them, and developing appropriate plans to manage the transitional smoothly from an old currency burdened with zeros.
To a nascent currency that needs care and good management, so that the country can actually achieve the maximum benefit from the process of .deleting zeros and sinarg In addition, carefully choosing the appropriate timing for the implementation of the process of deleting zeros is one of the most important success factors that must not be absent from the monetary decision-maker.
The wrong timing in implementation may negatively affect the behavior of consumers, confusing the markets (including financial markets), hitting the reputation of the new dinar, returning to the state of dollarization, fleeing capital, providing new ways and paths for money laundering operations, supporting irregular and illegal operations.
This may lead to further rises in prices and inflation rates, and this means complete failure of the dinar flighting process. This process is considered a double-edged weapon that requires a high level of carefulness, planning and good execution, away from speed In the implementation to search for rapid economic or political gains
So I say in conclusion, that Iraq still needs more time, effort and work to study this process in a deep and extensive manner and prepare the necessary conditions and tools that the country needs to reach the stage of the ability to implement the process of faltering the dinar effectively and successfully, and then reap its fruits and benefit from it according to the plans set, then we can say with reassuringly that Iraq has become a strong dinar that maintains its value, comparable to other strong currencies around the world, and may be even stronger .than the 1980 dinar.
-------
Henig: The goal is (return to the value of 1980 dinar), like the issues and topics discussed and interacted by Iraqis, opinions have varied and differed between an enthusiastic supporter of deleting zeros and a hesitant and rejecter, and the .state of disparity continues to this day The process of deleting zeros is related to replacing the old currency with multiple zeros with a new currency free of zeros.
In the case of the Iraqi dinar, for example, the prevailing proposal is to replace every thousand dinars of the current currency with one dinar of the new currency, and as is traded among economists in general and cashians in particular, the deleting zeros can achieve many benefits, the most important of which is getting rid of high inflation pressures on the economy and restoring confidence in the national currency and the monetary system as a whole, facilitating accounting processes and cash exchange between citizens, and reducing the cost of managing and maintaining the monetary block by reducing its .volume under circulation
Henig: THAT'S what I'm talkin' about!!!! Outstanding find, Miss Clare!!! Well done!!!
DallasDude: And furthermore the Iraqi Dinar in 1980,
1,980 dinars = $1.51 USD..IMO Good stuff Claire..