The Central Bank announced that the replacement plan of the Iraqi currency was about to be put into operation, noting that the process included 30 trillion Iraqi dinars. The Iraqi government and parliament will determinate the proper period to start the process.
The Iraqi Central Bank decided to implement this project after the inflation consequences and the economic declension during the nineties.
The mechanism which increased the Iraqi Dinar value after 2003 consisted in the establishment of a foreign auction to sell dollars resulted from oil market and its transfer to the Iraqi Development Fund. Then the money turned back to banks which would sell it in national currency.
The cash transaction after 2003 improved, but the most of the amount in circulation on the Iraqi market was in foreign currency.
Saleh said that the value of the Iraqi currency after the cancellation of zeros against the foreign currency would remain constant, and the exchange rate of the Iraqi currency could reach 1.200 per dollar.
After the replacement process, the payments system will operate better as well as currency circulation. CBI reacted positively, realizing a solid plan to reduce the number of old banknotes in circulation. Nevertheless, economists prevented that the changing process could generate substantial acts of corruption due to the weak banking system. Their premonition was contradicted by the successful replacement process which occurred in 2004.
The Iraqi Dinar revaluation will not occur suddenly; thus, citizens will be able to trade either in the old currency or in the new currency.
The Editor Business Council, Megan McArdle mentioned that the proposal of the Iraqi government for the foreign investors did not coincide with assertions presented in The American economist report. Nevertheless, McArdle affirmed that he came prepared to invest large sums of money in Iraq.
He also pointed out that opening a company in Iraqi was extremely difficult due to the expensive and cumbersome procedures. For instance, the name of the company must have validity, the establishment of the company also involves the drafting of several contracts, which cost about 900.000 Iraqi dinars. Then the confirmation of the establishment validity by the Central Bank takes two days an is worth 5.000 Iraqi dinars. The more expensive and durable process is the official registration of the company in the record business followed by the promotion process. The final step is to register the social security for employees and classify the company among other companies. The entire process takes 77 days and more than 2 millions dinars.
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