Carltons 12 Step Economic Program for Iraq

[Carlton]

Posted earlier, but with some significant revsions

http://www.imf.org/external/pubs/ft/scr/2006/cr0615.pdf

RTGS + ACH are necessary implementations before the acceptance of IMF's Article VIII (section 2a, 3 & 4)

NO Article VIII means no convertibility until at least after November 2006, So maybe December 2006/January 2007 when we should expect to see convertibility.

Iraq doesn’t have any pressure at the moment to accept convertibility of the dinar, So in this interim of waiting for the RTGS and the ACH to establish and along with the eliminations of the subsidies to be completed by years end 2006 also (remember the budget is allocating 600 billion dinar to help the poor specifically for the subsidy removal)

Then when all the "T"'s are crossed and the "I"'s are dotted, there will be an RV to coincide with a buying trend from the CBI to remove surplus dinar.

1) They will maintain the artificial defacto peg/rate as long as they can get away with it.

2) They will establish foreign reserves at a rate greater then the expectations stated in the EPCA and IMF

a) allowing the CBI to manipulate the dinar core circulation from downward pressure, ( remember this isn't really world currency yet )
b) they will SLOWLY build confidence in the economy during 2006

3) December 2005 - Oil subsidy program begins its first of a four phase dissolution

4) January 23 2006 - Iraq begins trading 2.7 billion bonds for debt

5) March 2006 - Oil subsidy program enters its second phase of dissolution

6) June 2006 - Oil subsidy program enters its third phase of dissolution

7) September - Oil subsidy program eliminated

8) October 31, 2006 - RTGS ( Real Time Gross Settlement ) with individual interbank payment obligations being settled across Exchange Settlement accounts held by each bank at the Reserve Bank.
(PRE-REQUIREMENT of the IMF's Article VIII Section 2a, 3, 4)

9) November 30, 2006 - ACH (Automatic Clearing House) Commencement
of payments clearing system between the headquarters of commercial banks and the CBI through the Automatic Clearing House (ACH). expected to be initiated (PRE-REQUIREMENT of the IMF's Article VIII Section 2a, 3, 4)

10) November 2006 - Oils subsidies though eliminated the goal of oil related products are to be on the average of Jordon, Kuwait, Saudi Arabia and Bahrain to be met.

11) January/2007 foreign reserves to equal 10.2billion

12) March 2007 - Conclusion of Iraqs commitment of the 15 month implemented FIRST Stand-by-Arrangement (Others may follow)

a) March 2007 - Upon completion of the FIRST Stand-by-Arrangement the remaining 20% Paris Club debt is to be eradicated.

PROGNOSIS:

a) January - March 2007 - Dinar is made convertible with a simultaneous RV at 1200 to 1 , dinar reserves are then reduced 20% to 7 trillion.

b) April - June 2007 market drives dinar to 1000:1 reducing the dinar reserves another 20% to 5.5 Trillion

c) July to September 2007 Dinar market drives dinar to possibly 600:1 reducing the dinar reserves to 3.3 Trillion

d) October to December 2007 Dinar finally stabilizes at 300:1 reserves are now 1.5 Trillion ( SPIKE IN OIL PRICES to near $100 bbl will drive the dinar to this biggest leap in value )

And ALL thru 2007 the CBI is gaining additional foreign reserves which adds to the stability of the economy and Iraq while reducing economic "shock" to the economy.

LATE 2008 near the GCC's acceptance Dinar peaks at 15:1 as per George Corm

[goldraker]

Say what!

Your thinking that the dinar will hit $ 15.00. Is that what you are saying.
Do you have a financial back ground?
I saw the 15:1 deal too, but I thought that they were recommending that they open with that.

[JeffreyW]

Nah, he means 15 Dinars:1 Dollar.

[investindinar]

PROGNOSIS:

a) January - March 2007 - Dinar is made convertible with a simultaneous RV at 1200 to 1 , dinar reserves are then reduced 20% to 7 trillion.

b) April - June 2007 market drives dinar to 1000:1 reducing the dinar reserves another 20% to 5.5 Trillion

c) July to September 2007 Dinar market drives dinar to possibly 600:1 reducing the dinar reserves to 3.3 Trillion

d) October to December 2007 Dinar finally stabilizes at 300:1 reserves are now 1.5 Trillion ( SPIKE IN OIL PRICES to near $100 bbl will drive the dinar to this biggest leap in value )

And ALL thru 2007 the CBI is gaining additional foreign reserves which adds to the stability of the economy and Iraq while reducing economic "shock" to the economy.

LATE 2008 near the GCC's acceptance Dinar peaks at 15:1 as per George Corm

Question #1: I'm aware that the UN recommended that the IQD be revalued at 15:1 IQD/USD. However, isn't the 'floating' of the IQD too soon? I would expect the CBI to be extremely mindful of the effect that such a rapid rise in the currency's value could have on the Iraqi economy. If the IQD revalues that fast (from 1200:1 to 300:1 in one year), wouldn't there be a danger of runaway inflation? It seems that they would need to start revaluing the currency this year (2006) beginning in the first quarter. Then carefully nursing a gradual rise in the exchange rate (from 1475ish) until it reached about 300:1 late 2007. Otherwise, the typical Iraqi would be facing an increase of about 400% in their purchasing power in 12 months time. That rate of increase is bound to affect their economy adversely.

Question #2: Please clarify what you mean by "reduce dinar reserves to..."? Do you mean the dinar market value of the CBI's hard currency reserves? Please specify. I'm asking this because I've gotten into trouble before misunderstanding statements.:lmao:

I think your forecast is very close to what will happen. However, the rate at which the IQD rises will become an issue with the CBI and a few other folks. The CBI may choose to intervene and keep it deliberately low. On the other hand, they may decide to get smart, and start demanding IQD instead of USD for payments on oil exports. If they did that, I think they could accelerate the value of the IQD versus the dollar REAL QUICKLY. In fact, I have a hunch that they may have something like that in mind once the IQD gets into the pennies range. That process would ensure that they could get in range with what the other GCC nations maintain their currency values at in relation to the dollar. However, if and when they internationalize the currency, they will need to keep foreign investors out of the ISX for as long as possible because if they don't, most if not all of their companies will end up being owned by foreigners.

That was a well thought out post and reasonably realistic.

Sincerely,

investindinar

[Sporter]

d) October to December 2007 Dinar finally stabilizes at 300:1 reserves are now 1.5 Trillion ( SPIKE IN OIL PRICES to near $100 bbl will drive the dinar to this biggest leap in value )

You have been watching too much "Squak Box", if "spot" is trading at 100.00 per we all have alot more on our plate then NID!. The World economic balance would be at risk so we could gain a lousy 15 to 1 rate, we'll need the revalue just to pay for our natural gas.

[investindinar]

d) October to December 2007 Dinar finally stabilizes at 300:1 reserves are now 1.5 Trillion ( SPIKE IN OIL PRICES to near $100 bbl will drive the dinar to this biggest leap in value )

You have been watching too much "Squak Box", if "spot" is trading at 100.00 per we all have alot more on our plate then NID!. The World economic balance would be at risk so we could gain a lousy 15 to 1 rate, we'll need the revalue just to pay for our natural gas.

If petroleum did get to $100 per barrel, then we'd be look at something over $4 per gallon, maybe $4.50. Last year, it got to $3.49 where I live, but that was due to a shortage of capacity resulting from Katrina. During that time petroleum was bumping up against $70 pb. Without any capacity constraints, my guess is $100 pb would be over $4 per gallon, but not more than $5. Even a little more than $5 wouldn't kill us. Europeans pay much more for their gas than we do and they have adjusted accordingly.

What should concern us is the possibility that the oil exporting nations of the Persian Gulf may start using the EURO as the currency of choice rather than the dollar, and Iraq comes along jumps on their bandwagon. Another possibility in the coming years is that Iraq may require that part of the payment they receive for their petroleum and/or gas be made in IQD (after they internationalize the currency). Either of those two possibilities would force a massive decline the value of the dollar and could result in throwing our economy into a deep recession. I don't the price of petroleum going up to $100 would do as much long term harm as a change in the currency of choice for those nations.

BTW, 15:1 is not bad at all. That's about 6.67 cents per dinar. That means a 1 million dinar stack would be worth $66,667.

Sincerely,

investindinar