Mnt Goat

  In Mnt Goat

Article: “PARLIAMENTARY FINANCE EXCLUDES RAISING THE EXCHANGE RATE OF THE DOLLAR IN ORDER TO COMPENSATE FOR OIL LOSSES”  …so this article is telling us the CBI is NOT going to devalue the dinar as raising the value of the dollar against the dinar would do this. This is good news. But now do the revalue the dinar then against the dollar? I have told you this many times already that there will NOT be a revaluation of the dinar of any sort in Iraq . Instead they will only transition the dinar to the lower denominations initially keeping the exact same value only having dropped the zeros from the currency. So, a 25,000 dinar note will become the new 25 dinar note. A 25,000 dinar note today is worth about 25 USD on the de facto peg. Thus,  the new 25 dinar note would be worth 25 USD but this is no longer on the de facto peg and that is where people get confused. But this is in Iraq only.

Since in the process the IMF plans to re-peg the dinar to a basket of currencies. In doing this they will reinstate the dinar and put it on a float within the basket. They have to do this. They have no choice if they are to carry out the process to completion once they begin it.  At this time a new rate will be assigned according to the basket of currencies.  If anyone travels outside of Iraq and needs US, they will exchange 1 dinar using the new rate of the basket for USD. Iraq plans to continue to use dinar inside Iraq not US dollar. So, inside Iraq if the value of the dinar is higher and buys more than why would you want to use the dollar? But the dollar is universal and demand is higher outside of Iraq. So, they must watch for inflation upon this transition period first.