Great post Carlton. I have a few questions...
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.
Originally Posted by Carlton
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.
A rational investor is a happy investor.