Iraqi Media Net, July 28 – Today Iraq is facing the most difficult problems its economy has ever had to confront. Apart from the violence and terror, which seem endless, and the deterioration of the electric sector and fuel products market (the two main pillars of IraqÂ¹s economy) extra hardships are being added to an already embattled economy.
The price of all items is increasing beyond any acceptable logic with the excuse always being that it is the price of electricity and transportation that are driving inflation.
Within this atmosphere of uncertainty and doubt, Minister of Finance Bayan Jaber al Zubaidi made a suggestion which had an enormous impact on those following economic trends in Iraq.
He suggested that the best way to fight inflation, which is spiraling out of control, is to abolish several zeros from the Iraqi dinar to align it closely with the value of the US dollar.
For example, if the dollar is equal to 1500 Iraqi dinar, one dollar would equal one Iraqi dinar, which would mean deleting the last three zeros from the dinar.
Economists, however, believe such an idea is impractical because with an economy such as IraqÂ¹s with its large foreign debt (estimated in tens of billions — the bulk of which has already been written off), a 40% rate of unemployment, a poor infrastructure, and an urgent need for tens of billions of dollars to rebuild its oil sector (the prime underpinning of the countryÂ¹s economy and major hard currency earner) chances for success are very slim.
The premise for the idea was based on the fact that some countries experiencing a similar state of affairs implemented such a course of action and were successful in controlling their levels of inflation.
Turkey, which managed to control its inflation by abolishing six zeros from its circulating currency, was cited as an example.
Most economists (in particular, the governor of the Central Bank, who is a world expert on such matters), however, felt that the suggestion made by the minister did not go far enough, so the proposal has, at least for the moment, been set aside.