Iraq Economic News and Points To Ponder Monday AM 8-12-24
Government Advisor: Increased Export Capacity Enhances The Value Of The Currency
Economical 08/12/2024 Baghdad: the mainstay of the emirate
The financial advisor to the Prime Minister, Dr. Mazhar Muhammad Saleh, stated that currency prices are determined globally in two main ways: floating and fixed rates, indicating that
there are many local and international factors that control the strength of the currency, such as
supply and demand,
interest rates,
inflation,
growth in the local economy, the
trade balance, and
others.
While he pointed out that the strength of the national currency is linked to its external value, specifically the exchange rate, as the
external value of money is directly linked to the stability of the current account of the balance of payments, especially in the long term. Saleh told Al-Sabah that
“stability of the external value of the currency requires a balance or surplus in the current account of the balance of payments relative to the gross domestic product,
which should indicate a stable state at a minimum of no less than 4 percent annually, and that
achieving that goal certainly depends on The annual growth rate in GDP is sustainable and high, and
exports outweigh imports within the country’s trade balance.” Dr. Saleh pointed out that
If “the country has the ability to export more goods and services than it imports, this enhances the value of the national currency, especially the external value of the currency itself, and
here the economy indicates a positive state, in addition to the availability of supportive foreign reserves that represent the main buffer against potential external factors and their effects.” In the overall economic situation.” The government advisor also explained that
“foreign reserves express the ability to maintain the stability of the external value of money, that is, the stability of the exchange rate, including the strength of the commercial efficiency of the reserves, which foreign reserves should cover the money supply in the broad sense, and more than 75 percent of that supply,” pointing out.
At the same time, high sovereign and private debts could weaken business, unless there is good financial management of debts that always leads to enhancing confidence in the national currency. Saleh pointed out that
“the other aspect that is linked to the value of the currency and its stability is the internal value of the national currency.
Just as we talk about the stability of the external value of the currency, that is, the exchange rate and its exchange strength with other currencies, the internal value of the currency is the other aspect of the stability and strength of the currency, and here the value of the currency is linked.”
Nationalism is directly linked to the general level of prices, that is, the inflation index,” indicating,
“If the general level of prices means the strength of goods and services expressed in money, then there is a correlation between price stability and the value of the national currency itself, and
this matter requires the availability of a wise monetary policy undertaken by central banks that makes growth In the monetary mass is proportional to the growth in gross domestic product or national income.” The spokesman noted that
“the quantitative theory of money depends on the principle of money neutrality, which believes that the cause of inflation in the long run is money itself, as
growth in the money supply in a way that is not proportional to growth in the gross domestic product leads to either inflation or contraction in the growth of the general level of prices.
Therefore, the effect of money in the overall economy, as addressed by the quantity theory of money, means that if the quantity of money increases in the economy, and there is no parallel increase in economic output, this will lead to an increase in the general level of prices. https://alsabaah.iq/100869-.html
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