7-15-13 Doc:   The tone of recent articles continues very positive. We have seen no less than 2 dozen talking about deleting the zeros, raising the value of the dinar, international desirability of the IQD, etc. What is most interesting here is when you put all these articles in context a real message is emerging. These articles also use language like as the economy improves, as international investment enters Iraq, in its natural coarse, over a slow amount of time, etc. With this we are very sure the plan is to raise the value over time i.e. managed or free float. The hype about an immediate RV to $3.44 is simply unfounded. This “slow” rise appears to be supported by all concerned in that these articles quote the CBI, Finance Ministry, and other GOI persons.

Many argue a slow rise does nothing for Iraq. Unfortunately these same people ignore the immediate versus longer term economic goals stated in the SIGR and Iraq’s own 5 year plan. One article in particular talked about immediately raising the value from the 1300 level to 1000. Many say this can not be… Suppose you were told all imported goods to the USA would be 30% cheaper tomorrow then they are today. You would be overcome with joy. When you take an internal to Iraq perspective this is what a move from 1300 to 1000 would do for the average citizen. This would solve the immediate need to “help” the average citizen hence the articles stating the purchasing power would increase very soon.

We do concur that longer term Iraq will need to get the rate at or above $1 to dedollarize and have the dinar as their currency of choice.  However to get there infrastructure needs to be in place like chapter 7 (now not an issue), article 140, HCL, etc.  Without this all in place it would be like trying to build a house on a partial foundation.  The house will not stand for long.  The truth is despite the rumors all is not in place and until you see it in the gazette do not believe it.  Until that time all rumors are simply that – rumors.

Now we can see why the articles are using language referring to the rise over time.  Also as we have stated numerous times this is actually the best economic path for Iraq and eliminates the rumored global reset and straight RV theories.  With all that is still not in place we continue to be of the opinion nothing major will be put in place during Ramadan. Yes we do believe work toward that end will continue during Ramadan but the movement to get to $1 or better will take another year or so.  We report, you decide.

7-15-13 Tlar:    Referencige the scientific study to delete the zeros.  The only study that was done on this subject was done in 2008 to my knowledge.

In that study it explored the subject thoroughly with the goal of trying to find out at what rate the CBI could support the currency and what’s its value should be.

The conclusions were that the rate should be $1.13 and that the CBI should defend that rate for two years before allowing the rate to float.  In other words a controlled value much like we see today.

This lady is on the finance committee and is therefore most likely to be “:in the know” after having just sat with Turki.  This sentence I’ve copied below, is very telling to me.

It indicates that to me Turki, is meeting with individual members of both the finance and the economic committees, selling the “scientific study” that was done in 2008 under Shabibi’s watch.

“Najib said that “previous administrative body of the Central Bank presented a study on the preparation of the project to delete zeros,” .

The rate today may be different than the rate suggest in 2008. Since 2008 a lot more currency had hit the streets even though we know they have been buying and retiring as much as possible through the auctions.

Also the reserves and the new monies coming to the reserves (80 billion + 82 billion + 3 billion) are significantly higher than they were in 2008. I think based on the slip up from the finance guy in his interview while talking about the 2014 budget and the parts that go into making it up, tells us more about the new rate than the 2008 study.

He slipped up and told us that each dollar will equal 1.16 dinars which is 86 cents. That is exactly what we would expect if they drop the leading zeros of the exchange rate. .00086 to .86.

I think Turki is using the study as a proof source when selling the deletion of the zeros, but he most likely updates the rate to conform to the conditions today.

By John Lee.

American-based private equity firm Carlyle Group is reported to be looking for opportunities in Northern Iraq.

A report from Dow Jones says the move comes as a result of a new $750m fund that the company hopes to raise to invest in the Middle East and North Africa.

The firm, which is expected to begin informal talks with investors after Ramadan, has been one of the few buyout firms to remain active in the region in recent years.

(Source: Dow Jones)

Iraqi Ministry of Trade and Iraq’s Union for Chambers of Commerce Predict that the market will witness in the upcoming few months a qualitative trade movement after Chapter Seven sanctions imposed on Iraq were lifted. Iraq is expected to regain its normal position and its wide-spectrum international transactions;

BAGHDAD / JD / .. confirmed the parliamentary economic committee in the House of Representatives that the committee demanded that the Central Bank is implementing a project to delete the zeros from the Iraqi currency.
He said the Commission’s decision MP economic Mahma Khalil Qassem told / JD / day: that the Central Committee had requested to reconsider the project and for purely economic reasons, is to maintain and improve the Iraqi currency against other currencies.
Khalil explained that this project is an old project was discussed in accordance with the laws in force in the central bank, and now a year after the discussion we see that the time is right, especially after the withdrawal of Iraq from Chapter VII of the revival of this project.
The Iraqi Central Bank estimated Estimated cost of the project to delete the zeros from the currency up to 172 billion dinars ..
She said a special study project to delete the zeros received / JD / copy: The speculative total cost of the project to delete the zeros up to a hundred and seventy-two billion dinars “..
The bank said in the study that the wages of transport and insurance of the role of copyright to the Baghdad International Airport up to (140), calculated on the basis of the ratio between the highest and lowest price (90-189) billion dinars from the presentations made by the companies ..
He added that “Estimated cost Mint coins of the new currency amounting to 16 billion dinars,” ..
The bank continued, “The wages of cargo transportation, Fridays and public holidays, overtime, etc. amounting to 15 billion dinars,” .. He pointed out that the cost of the media campaign and miscellaneous costs up to (1) billion dinars ..He recalled the bank the cost of the replacement process for the period from 15/10/2003 and the Bank of the reasons for the deletion of zeros, the first being that the process of deletion of zeros will be an opportunity to add new properties of the Iraqi currency to prevent potential counterfeiting of the new currency through the use of specifications of high security, leading to increased customer confidence ( and public institutions) as a result of low or no cases of counterfeiting ..
He pointed out that the second reason that the process of deleting the zeros will reduce Alokiem digital currency and financial Almahacbah and may play to reduce the time, effort and cost required to complete financial transactions and accounting as well as the possibility of reducing the number of banknotes traded especially if it were printed banknotes categories big “..
 He said the third reason, it enhances the possibility of maintaining the exchange rate of the Iraqi dinar against foreign currencies earned the confidence of dealers. / End

 

LINK

 

Baghdad (newsletter). The Economist hailed Abbas an overwhelming majority, with discussions about Iraq’s accession to the New York Convention to encourage investment, it will work on the development of the economy.

said economic expert d. Peace Sumaisem: that the Iraqi dinar is witnessing a remarkable increase in value, especially in recent times, and after the withdrawal of Iraq from Chapter VII.