Categorized | Investment, Mark DeWeaver on Investments and Finance
New Dinars for Old
Posted on 05 July 2011. Tags: iraqi dinar, ISX, Redenomination
At the end of last month, a spokesman for the Central Bank of Iraq (CBI) told reporters that a plan to redenominate the Iraqi dinar will be presented to the Council of Ministers in the near future. (See here and here.) The Council is then expected to submit the relevant legislation to Parliament for a vote. If the lawmakers approve the project, all existing banknotes will be replaced with new currency at the rate of 1,000 old dinar for one new over some unspecified period of time.
Given Parliament’s current backlog, this change can hardly be imminent. Still, you might think they could get around to voting on the CBI’s proposal some time before the end of this year. In that case, the redenomination could presumably be completed by the end of 2012.
The process will necessarily involve both the exchange of new banknotes for old and the restatement of contractual obligations in terms of the new currency. Among other things, three zeros will have to be eliminated from the share capital of the ISX listed companies as well as from the number of shares each has outstanding. (This will keep the par value at one dinar.)
I’m told this should be a relatively straightforward change for the depository center to make. Trading should not have to be suspended for more than a few days and it may be possible to proceed in phases of a few names at a time so that the entire market does not have to shut down during the transition period.
Similarly, it seems reasonable to expect the CBI to exchange new dinars for US dollars at one thousandth the rate for old dinars. In other words, if the original rate were IQD 1170 = US$ 1, post-redenomination this would become IQD 1.170 = US$ 1.
All of this seems reasonably straightforward for anyone holding assets such as currency or shares inside the country. For those holding dinar cash outside Iraq, however, things may not be so simple. How and on what terms their old dinars will be convertible into the new currency remains an open question.
http://www.iraq-busi...dinars-for-old/
Millionday's Comments:
This article is actually exciting to me for many reasons. The need to write something that has to have a purpose of confusion just says to me that we are very close. Let me explain- first this article is trying address the in country redenomination -the only problem with it is that we all know that Iraq is not the first country to redenominate their currency and this is not something that has no direct process that is economically correct. this has been done in the past and we know that. Now lets think about the content of the article. It is not possible to change the value of the product -dinar- for some companies and not for others in their stock market in order to keep it open. That is simply outrageous and makes no sense economically. It simply is not possible because of the effect that every market has on all business. Public owned companies are effected by the value that each company holds and the statement is just impossible to try to make sense out of -- it is going to be a major event but it wont be done in sections or one company and then another -- Just remember that they are not just standing over there chasing their tails as this article is trying to say -- we are the ones chasing ours -- but trust me -- this plan is not half done or full of trials and errors -- Love to ya, Millionday
