In TNT 

Tishwash: Iraq maintains its global ranking in gold reserves

The World Gold Council revealed, on Sunday, the increase in the possession of the central banks of countries of gold, as well as the governorate of Iraq on its global rank.

According to the table it published for the month of January, the council said, “Iraq has maintained the 38th position in the world and fifth in the Arab world with the largest gold reserves at 96.3 tons, which represents 8.4 percent of the rest of the other reserves.”

The World Council noted, “The central banks’ holdings of gold increased by 20 tons to reach 35.191 thousand tons compared to last December.”

He added, “The most prominent country that bought gold is Uzbekistan, where it added 8.4 tons to its gold reserves, amounting to 324 tons, while Qatar bought 3.1 tons, bringing its reserves to 56.7 tons, and India bought 2.8 tons, bringing its reserves to 672.9 tons. Then Kazakhstan bought 1.7 tons and Ukraine bought 0.6 tons. Tons “,

And the World Gold Council, which is based in the British capital, London, stated that “the increase was compensated for by more than the total sales in Turkey after the increase in domestic demand, which led to a decrease in its reserves, and that Mongolia reduced its gold reserves by 2.4 tons.” link

Tishwash:  World Bank: Iraq’s GDP to rise to more than 7% in 2022

The World Bank on Sunday predicted that Iraq’s GDP will rise to more than 7 percent in 2022, saying Egypt is the only country whose GDP has not been affected in 2020.

“Iraq’s GDP is expected to rise to 2% in 2021 and 7.3% in 2022,” the bank said in a report seen by Twilight News, noting that “Iraq’s GDP fell by 9.5% in 2020, up from 4.4% in 2019.”

“Lebanon was the most low est country in the Middle East with 19.2 percent of gdp,” he said, predicting that the country’s GDP would decline by 13.25 percent in 2021.

“Egypt is the only country whose GDP will not be affected in 2020, rising by 3.6 percent,” he said.

“Economic activity among oil-exporting countries is expected to recover by 1.8% this year, supporting a return to normal oil demand, a planned reduction in OPEC+ oil production, policy support and a gradual easing of domestic restrictions associated with the pandemic,” the bank said.

“The recovery in economic activity in the Middle East depends on the containment of the pandemic, the stability of oil prices, the non-escalation of geopolitical tensions and the assumption that vaccines will be distributed in the second half of this year and by 2022,” the Bank stressed.  link


Tishwash:  To boost the investment sector, Al-Rafidain launches a new initiative

Al-Rafidain Bank announced the launch of the Single Window initiative to finance investment projects in the country with open financial ceilings.

The media office of the bank said in a statement received by “Ultra Iraq” a copy of it, that “in line with the bank’s policy and plan aimed at supporting the national economy and contributing to activating the private sector, activities and investment opportunities, and under the direction of the Ministry of Finance to support investment, it was decided to launch the one-stop-shop initiative to promote the investment sector in Iraq “.

The bank pointed out that “this initiative is based on facilitating and simplifying procedures for companies and investors and completing the transaction in a timely and record speed away from red tape and excessive sagging episodes that require completion for a few days by establishing a unified room of the concerned departments assigned to it the task of investment that aims to complete the investor’s transaction.” He granted the loan with ease and smoothness.  link

Tishwash:  more education for the citizens

Foreign exchange markets and exchange rates

The foreign exchange market is a very active market around the worldThe value of exchanges in it is nearly five trillion dollars a dayThe exchange rates of the currencies that result from those exchanges are announced by many important economic and financial institutions in various countries of the world.

Banks and financial institutions around the world employ people to deal in currencies or what are called currency dealers. They buy and sell deposits in banks instead of exchanging large amounts of fiat currencies, as banks around the world keep deposits in different currencies depending on the country in which they operate.

For example, if a bank in France wanted to sell US dollars in order to buy Japanese yen, the bank might exchange dollar deposits it had for deposits in Japanese yen with a bank in Germany. But companies and individuals obtain foreign currency directly from banks and exchange agencies.

Exchange rates are determined by the currency markets all over the world. A variety of factors can influence these exchange rates, including import and export quantities, GDP, market expectations and inflation. For example, if the gross domestic product decreases in a particular country, then that country is likely to import less quantities and vice versa as well, causing a change in the amount of the local currency exchanged for foreign currencies.

These fluctuations also cause a shift in the currency exchange markets. For example, if Iraq enters into a state of economic recession, the Iraqi GDP will decrease and Iraq will import less goods from the United States. Consequently, the demand for dollars in the Iraqi market decreases and the dollar price against the dinar decreases. In other words, the Iraqi dinar is gaining a higher price compared to the dollar.

The currency exchange market includes companies, families, and investors who buy goods, services, and foreign assets (or who sell goods, services, and assets to foreigners). As a result, they demand (or offer) foreign (or local) currencies to complete their dealings. For example, some families buy imported goods that need foreign currencies to pay for. Likewise, wealthy individuals or companies make investments in foreign countries where they also need foreign currencies.

The exchange rate in the market is determined by the interaction of the forces of supply and demand for a particular currency, like any other commodity in the market. And like any other currency in the world, there are three sources that determine the demand for the Iraqi dinar:

First: Foreign companies and persons (including foreign visitors) who want to buy goods and commodities produced in Iraq, including tourism activities,

Second: Foreign companies and people who want to invest in Iraq through foreign direct investment, that is, establishing and managing projects in Iraq, or through investing in the foreign portfolio, that is, buying stocks and bonds that are issued by Iraqi institutions,

And third, currency traders who believe that the price of the dinar will rise in the future compared to its price today.

When the exchange rate of the dinar is high, the quantity demanded of it decreases. For example, when the exchange rate of a dinar is 1,200 dinars to a dollar, the quantity required to buy from it will be less than if its exchange rate was 1,450 dinars to a dollar by companies that want to buy Iraqi goods and goods, as well as for foreign investors who want to invest in the country.

For example, when a foreign person wants to buy an Iraqi commodity worth a thousand dollars, he will need to buy an amount of one million two hundred thousand Iraqi dinars according to the exchange rate of 1,200 dinars to the dollar, but he will need to buy one million and 450 thousand dinars if the exchange rate becomes 1,450 dinars to the dollar. That is, the inverse relationship between the required quantity of the dinar and the change in the exchange rate, the decrease in the price of the dinar leads to the purchase of larger quantities of it. That is, the demand curve for the currency (the Iraqi dinar here) is a negatively sloping curve.

As for supply, it is normal for there to be a positive relationship between the exchange rate and the amount of supply of the dinar. When the exchange rate of a dinar rises, a larger amount is displayed.  When the exchange rate changes from 1,200 dinars to the dollar to 1,450 dinars to the dollar, people and institutions that own the dinar will have to offer larger amounts of it to get one dollar that you use for the purposes you want, such as buying foreign products denominated in dollars. Therefore, the currency supply curve is positively sloping.

And like any other market, equilibrium occurs in the currency exchange market when the forces of supply and demand meet, that is, the quantity supplied is equal to the quantity demanded at the equilibrium point through which the equilibrium exchange rate is determined. When the exchange rate in the market, for any reason, is higher than the equilibrium price, there will be a surplus of the local currency, which causes pressure to the lowest on the exchange rate and this will continue until the equilibrium price is reached. Likewise, if the market exchange rate is lower than the equilibrium exchange rate, there will be a scarcity in the local currency, which puts upward pressure on the exchange rate until the equilibrium price is reached.

The surplus and scarcity in the currency exchange market is removed very quickly due to the huge volume of exchanges in the major global currencies and currency dealers communicate with each other in real time through the Internet.

Shifts in the supply and demand for a currency cause a change in the exchange rate. The primary factors causing shifts in the supply and demand for a currency include, but are not limited to:

Changes in demand for domestic products and changes in demand for foreign goods and commodities.

The change in the desire to invest in the country compared to the desire to invest outside the country.

A change in the expectations of currency dealers about the future price of the local currency versus the future price of the foreign currency.

Shifts in the supply and demand curves of a currency:

Any change in any market factor other than the exchange rate leads to shifts in the supply curve, the demand curve for the currency, or the two curves together, which leads as a result to a change in the exchange rate.

For example, if a country that is considered a trading partner of Iraq achieves significant economic growth, the incomes of families in that country will increase, and the demand for Iraqi goods and goods by the residents of that country will increase.

At a certain exchange rate, the demand for the Iraqi dinar will rise, and the demand curve for the Iraqi dinar will shift to the right (i.e. the increase in demand), which will raise its exchange rate against the currency of that country. Likewise, if interest increases on deposits and bonds in Iraq, the demand curve for the dinar will shift to the right as the desire to invest in Iraqi financial assets increases. Currency dealers also play an important role in the currency exchange markets because the currency exchanges they carry out increase the volume of transactions and liquidity in the market. If currency dealers become convinced that the future price of the dinar will be lower than its current price, the demand for the dinar will now decrease, the demand curve will shift to the left, and the exchange rate of the dinar will decrease against other currencies under the condition that all other factors remain constant.

The factors that affect shifts in the currency supply curve are similar to those that affect shifts in the demand curve. An economic growth in Iraq leads to an increase in the incomes of the families who live in it, and an increase in their demand for goods and commodities, including foreign goods and commodities, and companies spend more on purchasing foreign raw materials for use in their domestic production.

To achieve this, they must supply larger quantities of Iraqi dinars to replace them with foreign currencies, which leads to a shift in the dinar supply curve to the right (i.e., an increase in the dinar supply). Likewise, if the interest rate rose in the United States, for example, financial assets in that country would become more attractive to the Iraqi investor, which would make him offer more Iraqi dinars to obtain dollars to be used in the purchase of American financial assets.

Market adjustment to arrive at a new equilibrium exchange rate

The factors affecting the forces of supply and demand for a currency are constantly changing. Whether the exchange rate changes up or down depends on the shifts in the supply and demand curves. For example, if the demand curve for the Iraqi dinar to switch dollars to the right is shifted at a level greater than the shift in the supply level, this will lead to a rise in the exchange rate of the dinar against the dollar.

Changes in the exchange rate may have two types of effect on the demand for the local currency: the wealth effect and the exchange effect. We are interested in the second type of effect. Exchange rate movements may generate a currency substitution effect, as investor expectations play a crucial role. If people expect that the exchange rate is likely to decline further after an initial decline (and this appears to be what is happening in Iraq now), they will respond to this by increasing the share of foreign assets in their holdings of funds

. This increases the supply of local currency to obtain foreign currency due to the high opportunity cost of holding the local currency, which means that the exchange rate of the local currency decreases. Therefore, currency exchange can be used to hedge this risk. In this regard, a lower exchange rate would reduce the demand for the local currency.

* Professor of Economics and Political Science, Kansas State University, USA.  link