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Dr. Shabibi answers a revaluation and redenomination question made by two attendees. Published on Oct 21, 2012
Published on Oct 21, 2012
Date: Abril 19,2011
Location: US Chamber of Commerce Washington, DC
Transcript:
Question: Revaluation With respect to the ongoing and need of stability in Iraq and its exchange rate, we did not follow that there is a direct need for a potential revaluation of the currency to its due for domestic and foreign investment in Iraq, and in regard to that, how far you believe we are from a potential revaluation of the Iraqi currency.
Shabibi answer: Well thank you very much for this question and the ... ahmmm ....... even if I know the answer I cannot tell you .. (laughter) the thing is ... you cannot have an economist saying without....the answer depends, so the question here is if revaluation is really going to depend on what extent we are going to continue controlling the inflation.. as you know, if you go to the Central Bank website ... the first job is maintaining price stability . So there is a little bit of inflation in Iraq ... it use to be 2%... 3% ... now is about 5% . But we are watching that very carefully ... If this inflation continues we will have to revisit the question of exchange rate because revaluation depends on inflation ... of course .. the other factors that determine the movement in currencies are a lot ... sometimes we look at trade, exports and imports, all the obligations, the balance of payments and all this things ...definitely no doubt you look at those ... but those are problems related to the development part of the economy. The question of maintaining a price stability is really something ...you see the inflation and all this things..... cause nobody else in the economy is concern with inflation .... the government puts its budget... the government is the spender and the Central Bank its saver.... It's not very important for them to concentrate on inflation .... so actually the question here is we are going to track and follow the development in inflation first and of course other factors which I mentioned. Second then will determine our exchange rate movement.
Thank you Governor. This may be the same question, so I can understand if you can't answer. My name is Bob Kelly, I am an Investor in Iraq, the Summit Hotel in the International Zone with the OPEC financing. Question: Redenomination I've heard a report in the last couple of days That Iraq is about to cut three zeros off the currency ...they call that re-denomination that may be the same question (revaluation) that you just received but I wonder if you had any information about that.
Shabibi answer Well, I mean .... I don't know whether if it is the same question (revaluation), I think this cutting of three zeros... shouldn't be exaggerated ... actually that is the problem...the question is ... just " re-denomination" .... and .... people writing a lot of articles in the news papers... criticizing the Central Bank...., that is going to .... the value the Iraqi dinar... that is going to depreciate ... all kinds of talks. This is a question, just actually, to facilitated payment... ease of counting and all this things.... and of course when you see a lot of figures, you see trillions and huge figures.... if you want to be precise and you see twelve figures or fifteen figures or digits ... So I think we have a plan on that. If you remember ... why .... there was not a government decree to add this zeros. It happened because of the course of development of the economy at the beginning of the eighties.... Inflation was very high ... Inflation was rampant and therefore ... I mean small denoms start not to be use ... so government started to add the three zeros at the time.... and of course conditions are different now . Inflation is under control, exchange rate is manage by the Central Bank.... all these things when you have the zeros you could not manage ... not because of fault of the government or the Central Bank (only) ... which I think there was but because there were a lot of exogenous (external) factors. I'm not saying that we are champions now I mean ... there were a lot external factors which affected and a lot of people did not know what to do, so they started to add three zeros and all this things. So now the situation is completely different from that time, you had a high inflation, you have now a low inflation, you had actually something which is a stable macroeconomics situation . At that time the situation was not stable . So the only way to combat all of this things at the time was to increase the denomination and put three zeros.
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