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The Sri Lanka dollar dilemma is an example
Economical 09/04/2024
Yasser Al-Metwally
Many countries, or rather countries with emerging or emerging economies, share the phenomenon or characteristic of the fluctuation of dollar exchange rates and other effects on their economies and their exposure to financial and economic crises periodically.
Of course, the size and extent of the impact of exchange rate fluctuations is different from one country to another, depending on the strength of its economy.
The rate of impact in rentier countries that rely on oil as a main source of their resources is relatively less and adopt a fixed exchange system, whether in an international currency such as the dollar or pegged to a basket of currencies.
Unless oil prices decline, here countries may have equal influence, and it may sometimes be in favor of non-oil countries, depending on how their balances of payments are affected.
The main indicator of the size of the effect is the rate of inflation occurring in a country, and some may be surprised that the
decline in oil prices may be to the benefit of non-rentier countries that depend on the volume of their exports of their other domestic products.
Here I give an example of this phenomenon.
When oil prices rise, the Turkish economy is affected by this due to its impact on production costs, which leads to the absence of some products on the one hand.
On the other hand, we find that during the outbreak of the Russian-Ukrainian war and the imposition of the blockade on Russia, Russia was forced to reduce oil prices. Oil to compete and obtain revenues.
Turkey was among the countries to which Russian oil was supplied, in addition to China and others.
There was a recovery in the Turkish economy at that time, which led to a reduction in the costs of Turkish production of goods.
Promises from the beginning on the subject of the problem of the dollar and the fluctuation in its exchange rates, because the exchange rate process of these countries is linked to the dollar, which made them suffer from the presence of more than one exchange rate outside the state’s pricing system.
Here, a number of economists advise the necessity of changing the exchange system and trying to find exchange rates for the basket of currencies (that is,
for each foreign currency in the components of the basket and with a specific relative weight according to the commercial areas with which the country is linked externally) in order to eliminate or reduce the parallel prices and bring them to a state of balance with the price. Official exchange.
These solutions prompted the BRICS group to attempt to get rid of the dollar’s dominance in global trade financing, and it is continuing this project.
It has achieved modest results from cooperation, especially in the field of settling cash payments through its currencies, and it is hoped that it will be able to break the monopoly of the dollar in the long term.
There is Sri Lanka's experience.
How was it able to control the exchange rate?
Sri Lanka has limited dealing in the dollar exclusively in banks and has prohibited its use and even its carrying, as
it is a legal violation of the dollar of unknown origin and is held accountable by law, that is, with a strict monetary policy against (dollarization), as that country has been able through it to achieve stability in the exchange rate and keep it away from the problems of dollarization and deal with the internal economy in two currencies, one of which is subordinated. For a foreign monetary system.
Other than that, some countries are trying to achieve a balance between the official and parallel prices through the process of regulating imports, preventing the entry of many goods that do not affect the citizen’s livelihood, and postponing personal desires, such as preventing the import of cars and luxury items for a while, and
this is what is allowed by the laws of the World Trade Organization.
That is, postponing the import of some goods to address the country's economic situation.
The bottom line is that the issue of currency exchange rate fluctuation is a global phenomenon that is not limited to a specific country, and everyone is trying to address it in their own way.
https://alsabaah.iq/102146-.html
Economical 09/04/2024
Yasser Al-Metwally
Many countries, or rather countries with emerging or emerging economies, share the phenomenon or characteristic of the fluctuation of dollar exchange rates and other effects on their economies and their exposure to financial and economic crises periodically.
Of course, the size and extent of the impact of exchange rate fluctuations is different from one country to another, depending on the strength of its economy.
The rate of impact in rentier countries that rely on oil as a main source of their resources is relatively less and adopt a fixed exchange system, whether in an international currency such as the dollar or pegged to a basket of currencies.
Unless oil prices decline, here countries may have equal influence, and it may sometimes be in favor of non-oil countries, depending on how their balances of payments are affected.
The main indicator of the size of the effect is the rate of inflation occurring in a country, and some may be surprised that the
decline in oil prices may be to the benefit of non-rentier countries that depend on the volume of their exports of their other domestic products.
Here I give an example of this phenomenon.
When oil prices rise, the Turkish economy is affected by this due to its impact on production costs, which leads to the absence of some products on the one hand.
On the other hand, we find that during the outbreak of the Russian-Ukrainian war and the imposition of the blockade on Russia, Russia was forced to reduce oil prices. Oil to compete and obtain revenues.
Turkey was among the countries to which Russian oil was supplied, in addition to China and others.
There was a recovery in the Turkish economy at that time, which led to a reduction in the costs of Turkish production of goods.
Promises from the beginning on the subject of the problem of the dollar and the fluctuation in its exchange rates, because the exchange rate process of these countries is linked to the dollar, which made them suffer from the presence of more than one exchange rate outside the state’s pricing system.
Here, a number of economists advise the necessity of changing the exchange system and trying to find exchange rates for the basket of currencies (that is,
for each foreign currency in the components of the basket and with a specific relative weight according to the commercial areas with which the country is linked externally) in order to eliminate or reduce the parallel prices and bring them to a state of balance with the price. Official exchange.
These solutions prompted the BRICS group to attempt to get rid of the dollar’s dominance in global trade financing, and it is continuing this project.
It has achieved modest results from cooperation, especially in the field of settling cash payments through its currencies, and it is hoped that it will be able to break the monopoly of the dollar in the long term.
There is Sri Lanka's experience.
How was it able to control the exchange rate?
Sri Lanka has limited dealing in the dollar exclusively in banks and has prohibited its use and even its carrying, as
it is a legal violation of the dollar of unknown origin and is held accountable by law, that is, with a strict monetary policy against (dollarization), as that country has been able through it to achieve stability in the exchange rate and keep it away from the problems of dollarization and deal with the internal economy in two currencies, one of which is subordinated. For a foreign monetary system.
Other than that, some countries are trying to achieve a balance between the official and parallel prices through the process of regulating imports, preventing the entry of many goods that do not affect the citizen’s livelihood, and postponing personal desires, such as preventing the import of cars and luxury items for a while, and
this is what is allowed by the laws of the World Trade Organization.
That is, postponing the import of some goods to address the country's economic situation.
The bottom line is that the issue of currency exchange rate fluctuation is a global phenomenon that is not limited to a specific country, and everyone is trying to address it in their own way.
https://alsabaah.iq/102146-.html
