Newspaper: Printing new cash denominations in Iraq may increase burglaries and erode the value of the currency
A London newspaper, in a report published today, Thursday, shed light on the efforts of the Central Bank of Iraq to print a new currency of the category of 20 thousand dinars, while indicating that this step may lead to the erosion of the value of the local currency in the country, while indicating that it increases armed robbery. which has risen recently.
This comes amid warnings of the dangers of this step, which may lead to the erosion of the value of the local currency, which after the invasion in 2003 witnessed a change in its shape and nature in conjunction with the changing and fluctuating Iraqi financial system in light of volatile conditions that made it lose its local value and market influence.
. The local currency also suffered a major collapse in December 2020, after the central bank decided to reduce the exchange rate by up to 22 percent from the price of 1,200 to 1,450 dinars against the dollar, due to the financial deficit and the economic crisis in the country. Al-Araby Al-Jadeed newspaper said in its report, which was followed by Al-Muttala agency, that “the procedure of the central bank’s endeavor to issue the new monetary category sparked a state of controversy among local circles about the feasibility of the decision and its economic repercussions on the Iraqi financial markets.”
Monetary structure
Iraq has a number of circulating monetary denominations that form the structure of the local monetary mass in the market, and these denominations include (250, 500, 1000, 5000, 10000, 25000, and 50000) dinars, and the last issue was in 2011 when the Central Bank of Iraq issued a banknote of the category Fifty thousand dinars, to be included in the Iraqi cash payments system.
The adviser to the Central Bank of Iraq, Ihsan al-Yasiri, said that the procedure for printing banknotes in the category of 20,000 dinars falls within the field of normal monetary practices for the central bank, and it is now within the framework of reviewing the structure of the national banknote series, and that this category will be an intermediary for the structure of cash currencies and will provide an addition For smaller groups, such as five thousand and ten thousand dinars. Al-Yasiri indicated, in a press interview, that the volume of the cash mass in circulation with banks and citizens currently ranges between 83-84 trillion Iraqi dinars, and the pursuit of the new issuance of the 20 thousand category will not change much of the volume of the trader because it will be included within the existing liquidity.
Al-Yasiri also stressed that printing the new denomination will not affect the value of the Iraqi currency in circulation, nor will it affect the levels and volume of inflation in the market, because inflation is linked to economic policies and has nothing to do with monetary circulation. He pointed out that the Department of Issuance and Treasurys (one of the institutions of the Central Bank) is working on a careful study about the possibility of printing the cash category of 20 thousand dinars, and how to deal with it according to the monetary developments taking place in the Iraqi financial market.
Issuance risk
For his part, the economic researcher, Omar Al-Halbousi, warned of negative repercussions that might face the value of the Iraqi dinar if the Central Bank issued a 20,000 dinar banknote. The newspaper quoted al-Halbousi as saying, “Iraq does not need to print more currency, but rather needs to develop a monetary policy that contributes to achieving stability in the value of the dinar.”
He pointed out that “the step of printing a new category leads to adverse damages that contribute to the decline in the value of the currency and raise inflation in prices, which burdens the citizen, in addition to exacerbating the economic and financial problems that Iraq suffers from as a result of the floundering decisions by the government and the central bank, all of which were counterproductive.” . And Al-Halbousi indicated that “printing a new monetary category will produce two types of inflation, the first is monetary and the other is price, and both of them pose risk factors for the national economy through high levels of inflation and the occurrence of economic stagnation.”
Development of the financial system
For his part, the Iraqi economist, Karim Al-Helou, believes that “the problem of the Iraqi financial market is not in the volume of cash flow or banknotes, and that the volume of the local currency in circulation does not constitute any problem, because more than 80 percent of the monetary mass is circulating in the market or with banks.” “. The newspaper quoted al-Hilu as saying, “The printing of any new category will not bring about any positive change, but will constitute an increase in the monetary mass, which leads to an increase in the rate of storing money in light of a weak banking system, as is the case in Iraq, because of which burglaries and crime rates have increased.” In recent years, as a result of storing cash in homes instead of depositing it with banks. He pointed out that “there is a contradiction between the government’s vision, which announced its intention to develop the financial system, pay bills and collect through an advanced digital system in the coming months, and between the Central Bank’s measures to plan the issuance of new denominations of paper currencies in the market.” Al-Helou called on the Central Bank to develop the financial digital system and improve banking performance in line with the development in the financial systems of neighboring countries and the world, instead of issuing new monetary categories and pumping them into the market to constitute an additional burden on the monetary masses and the national payment system.
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