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The issuance of sovereign bonds step towards the right path
19/06/2015
of the Ministry of Finance announced that the ministerial delegation negotiating a government in the Turkish city of Istanbul for the issuance of government bonds in the global financial market, as pointed out that the delegation held meetings with international companies to determine the credit rating of Iraq in the global market money.
the goal of issuing sovereign bonds is for the purpose of finding funding to cover the budget, which is estimated at about a quarter of the budget for the current year of $ 119.6 trillion dinars, where Article (2 / II / A allowed) from the budget of the finance law inability way deficit through internal and external borrowing. While domestic borrowing does not require credit rating, the launch of the Iraqi bonds to foreign investors needs to this classification in order to protect investor funds from the loss and support the bond strength in global markets.
There are three international agencies specializing in credit rating, a Standard and poors, Moody's, Fitch, . Each one of these companies use their own codes to bond rating, for example, used Fitch AAA index for bonds with credit quality, and the index BBB bonds of medium quality, and CCC bonds' bad quality index.
What is the difference between government debt and sovereign debt? There is a big difference. Both have on the government's debt and the government paid on maturity. The main difference between both types that the government pays the loan in local currency sovereign debt while paying the agreed currency, if the sovereign debt in dollars, Van fulfill this debt will be the dollar, though the euro, the repayment will be in euros. Use government debt to cover the operating budget of the country (the staff and workers' salaries) and a means of reducing money supply in the domestic market for the purpose of absorbing the purchasing power of citizens and reducing the rate of inflation in the country. The sovereign debt they use for the purpose of financing the capital budget (investment) aimed at financing economic projects, which require imported materials, and that is exactly what it needs of the Iraqi economy. Iraqi dinar currency not used in global trade and thus can not be used in imports or a way to pay for companies implementing projects in Iraq. Iraq needs the dollar to import electric cars, fruit and vegetables and devices, and the owners executing projects in Iraq companies will not accept Iraqi dinar, but universally accepted currency such as the dollar and the euro.
importance of credit rating is that through this classification determines the interest on the loan rate and the index of the strength of the exporting country's economy Bond and political stability. Interest on the bonds from AAA category lower than the interest on the value of the bonds from BBB category or CCC. I think that competent companies classification index will give the Iraqi B bonds for several reasons of which is that the Iraqi economy is still strong, Iraq has tremendous natural resources, and has no history of delay in payment of debts.
Animations credit ratings do not remain the same for long. Some countries indicators escalate during the life of the loan, while the other ones fall for various reasons. For example, agency FITCH decided to reduce the debt of the Austrian sovereign credit rating to AA after the AAA was because of concerns about high debt levels, which predicted that this debt is 89% of GDP this year. The agency cut the Mood's credit rating for bonds Russian one notch because of what it called the deterioration of the prospects for development of the Russian economy on the back of lower oil prices in global markets, where the agency is expected to shrink GDP of Russia size to 5.5% in 2015 and to around 3% in 2016. Agency reference that it will focus in their ratings the next Russian government bonds on the size of reserves of Russia cash, and expectations of oil prices, and the efficiency of the work of the Russian central bank to restrict the ability of Russian borrowers access to the international capital market conditions.
On the other hand, was raised to Egypt degrees higher credit rating and that Because of the stability of the cash reserve with the central bank at a level of $ 15.5 billion, an amount that provides a great cover to service external debt, forecast to increase domestic and foreign investment, in addition to what has been announcing the signing of the foreign direct investment of about $ 38 billion, which reduces the risk of facing balance of payments . The lifting of the credit rating of the State of Egypt will reduce sovereign bond interest rate of 3.5% and 4.5% to 2.5%, which will contribute to reducing borrowing debt service and reduces the burden on the State and facilitate private borrowing in the future negotiations.
The move Iraq towards global capital market successful and needed step, especially since the News stopped projects because of the fiscal deficit without doubt have negative effects outweigh the cost of these loans (interest on the bonds, which will not exceed 6%). Stop projects under construction leads to disruption of the desired benefits them (hospitals, public roads, bridges, government buildings), and disable lead to the demobilization of the hands of working from work and deprived of wages that cover the costs of what you need their families, and the disruption of economic development. For this reason, all developed and non-developed countries in the world are fighting in order to provide financial liquidity, especially in times of economic recession, wars, and natural disasters.
For example, the sovereign debt of developed debt volume has increased rapidly, moving from 74% to 107% BIM 2007 and 2011 The International Monetary Fund forecast that up to 111% by the end of 2014. Germany ranges between 60% and 79% of the size of its gross domestic product by 2015, the same percentage for each of the Flandh and the Netherlands and Hungary. Sovereign debt to France, Britain and Austria amounted to between 80% and 99%, while Spain, Italy, Belgium, Italy, Greece and orange is the largest European countries in terms of the weight of its sovereign debt ratios above 100%.
Iraq is passing through abnormal circumstances, such is the deterioration of oil prices in the global market and driving a fierce war with totals Daash, heading from the first envelope acute shortage of financial government imports, as we head for the second circumstance convert a large proportion of government funds to cover military expenses, and it becomes natural that Iraq could move towards global capital market to meet the financial inability.
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19/06/2015
of the Ministry of Finance announced that the ministerial delegation negotiating a government in the Turkish city of Istanbul for the issuance of government bonds in the global financial market, as pointed out that the delegation held meetings with international companies to determine the credit rating of Iraq in the global market money.
the goal of issuing sovereign bonds is for the purpose of finding funding to cover the budget, which is estimated at about a quarter of the budget for the current year of $ 119.6 trillion dinars, where Article (2 / II / A allowed) from the budget of the finance law inability way deficit through internal and external borrowing. While domestic borrowing does not require credit rating, the launch of the Iraqi bonds to foreign investors needs to this classification in order to protect investor funds from the loss and support the bond strength in global markets.
There are three international agencies specializing in credit rating, a Standard and poors, Moody's, Fitch, . Each one of these companies use their own codes to bond rating, for example, used Fitch AAA index for bonds with credit quality, and the index BBB bonds of medium quality, and CCC bonds' bad quality index.
What is the difference between government debt and sovereign debt? There is a big difference. Both have on the government's debt and the government paid on maturity. The main difference between both types that the government pays the loan in local currency sovereign debt while paying the agreed currency, if the sovereign debt in dollars, Van fulfill this debt will be the dollar, though the euro, the repayment will be in euros. Use government debt to cover the operating budget of the country (the staff and workers' salaries) and a means of reducing money supply in the domestic market for the purpose of absorbing the purchasing power of citizens and reducing the rate of inflation in the country. The sovereign debt they use for the purpose of financing the capital budget (investment) aimed at financing economic projects, which require imported materials, and that is exactly what it needs of the Iraqi economy. Iraqi dinar currency not used in global trade and thus can not be used in imports or a way to pay for companies implementing projects in Iraq. Iraq needs the dollar to import electric cars, fruit and vegetables and devices, and the owners executing projects in Iraq companies will not accept Iraqi dinar, but universally accepted currency such as the dollar and the euro.
importance of credit rating is that through this classification determines the interest on the loan rate and the index of the strength of the exporting country's economy Bond and political stability. Interest on the bonds from AAA category lower than the interest on the value of the bonds from BBB category or CCC. I think that competent companies classification index will give the Iraqi B bonds for several reasons of which is that the Iraqi economy is still strong, Iraq has tremendous natural resources, and has no history of delay in payment of debts.
Animations credit ratings do not remain the same for long. Some countries indicators escalate during the life of the loan, while the other ones fall for various reasons. For example, agency FITCH decided to reduce the debt of the Austrian sovereign credit rating to AA after the AAA was because of concerns about high debt levels, which predicted that this debt is 89% of GDP this year. The agency cut the Mood's credit rating for bonds Russian one notch because of what it called the deterioration of the prospects for development of the Russian economy on the back of lower oil prices in global markets, where the agency is expected to shrink GDP of Russia size to 5.5% in 2015 and to around 3% in 2016. Agency reference that it will focus in their ratings the next Russian government bonds on the size of reserves of Russia cash, and expectations of oil prices, and the efficiency of the work of the Russian central bank to restrict the ability of Russian borrowers access to the international capital market conditions.
On the other hand, was raised to Egypt degrees higher credit rating and that Because of the stability of the cash reserve with the central bank at a level of $ 15.5 billion, an amount that provides a great cover to service external debt, forecast to increase domestic and foreign investment, in addition to what has been announcing the signing of the foreign direct investment of about $ 38 billion, which reduces the risk of facing balance of payments . The lifting of the credit rating of the State of Egypt will reduce sovereign bond interest rate of 3.5% and 4.5% to 2.5%, which will contribute to reducing borrowing debt service and reduces the burden on the State and facilitate private borrowing in the future negotiations.
The move Iraq towards global capital market successful and needed step, especially since the News stopped projects because of the fiscal deficit without doubt have negative effects outweigh the cost of these loans (interest on the bonds, which will not exceed 6%). Stop projects under construction leads to disruption of the desired benefits them (hospitals, public roads, bridges, government buildings), and disable lead to the demobilization of the hands of working from work and deprived of wages that cover the costs of what you need their families, and the disruption of economic development. For this reason, all developed and non-developed countries in the world are fighting in order to provide financial liquidity, especially in times of economic recession, wars, and natural disasters.
For example, the sovereign debt of developed debt volume has increased rapidly, moving from 74% to 107% BIM 2007 and 2011 The International Monetary Fund forecast that up to 111% by the end of 2014. Germany ranges between 60% and 79% of the size of its gross domestic product by 2015, the same percentage for each of the Flandh and the Netherlands and Hungary. Sovereign debt to France, Britain and Austria amounted to between 80% and 99%, while Spain, Italy, Belgium, Italy, Greece and orange is the largest European countries in terms of the weight of its sovereign debt ratios above 100%.
Iraq is passing through abnormal circumstances, such is the deterioration of oil prices in the global market and driving a fierce war with totals Daash, heading from the first envelope acute shortage of financial government imports, as we head for the second circumstance convert a large proportion of government funds to cover military expenses, and it becomes natural that Iraq could move towards global capital market to meet the financial inability.
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