A billion may become an alpha .. What does it mean to delete countries zeros of their currency?
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A billion may become an alpha .. What does it mean to delete countries zeros of their currency?
Admin Sun Aug 05, 2018 6:37 pm
Sunday, 05-08-2018 at 09:11 Haneen Yassin - Gulf Online
On August 20, Venezuela will be on a date with the cancellation of 5 zeros of its currency, in an attempt to adapt to inflation expected to reach 1 million percent this year due to the steady deterioration of the country since the collapse of oil prices in 2014, making it unable to maintain Its socialist economic system.
But, what does it mean to cancel zeros from the currency? Has Venezuela ever taken this step? And what their feasibility and repercussions on the economy of the country and the citizen? .. "Khaleej Online" in the context of the following report in response to these questions.
The deletion of 5 zeros from any currency means that one million of this currency after the abolition of zeros will become only 10, and when the cancellation of 3 zeros will become 1000 and so on, and follow this procedure when the value of the currency collapses and their purchasing value is limited or not.
The most striking example of the collapse of the local currency is what happened in Zimbabwe. The last coin was worth $ 100 trillion, and that value did not buy a parsley package because of the inflation rate of more than 1000% 2009 and its replacement in US dollars and the South African Rand.
Venezuela has eliminated currency zeros in several countries. Zimbabwe has eliminated 3 zeros from its currency in 2003, Sudan has eliminated zero in 2007, Bolivia has eliminated three zeros in 2008, Romania has removed four zeros from its currency in 2005 and Turkey has written off six zeros from its currency in 2005.
But deleting zeros from the currency if not accompanied by economic reforms, it will not change anything, it is not much different from adjusting the size of the banknotes or changing their colors, or add a new fee or remove a picture of them.
Perhaps the most important experience in the deletion of zeros from the local currency was Turkey, with intentions in neighboring Iraq also, the two countries faced many problems and difficult; because of inflation and devaluation of the currency. The following is a review of the stations of these trials.
- Turkey
13 years ago, on 1 January 2005, Turkey announced the abolition of 6 zeros from its local currency (Lira). Inflation in the country has forced it to print large numbers of its currency and high values since 1981.
The currency of the value of 20.000.000, which used in Turkey the largest paper currency in the world, and create a number of zeroes the big problems in transactions, for example became difficult to read the numbers of taxi counters, and the list of goods, in addition to the serious arithmetic errors that resulted from the number of zeros .
According to statements by the current president Recep Tayyip Erdogan, in March 2008, to enter the toilet in Turkey before 2005, the Turkish citizen had to pay one million pounds, to turn this figure currently to one pound only.
The effect of canceling the six zeros from the Turkish lira was positive in terms of price stability, and the inflation rate fell to one percentage point.
But the deletion of zeros was not the only reason for the low inflation, it was accompanied by economic stability of the country, and the reform plans included most economic sectors, which led directly to the fight against inflation.
After Turkey's inflation rate was 70.8% in 2002 before the AKP came to power, this rate was 15.39% last July.
- Iraq
During the period of the total siege on Iraq between 1990 and 2003, a stifling Iraqi economic crisis emerged. The collapse of oil exports, the deterioration of industrial and agricultural production, the rise in unemployment and inflation, the non-payment of foreign debts and the chronic deficit of the state budget.
Therefore, it was obvious that the exchange rate fell sharply until the exchange value of the dollar reached 3000 Iraqi dinars in 1995.
Because of this situation, it was necessary to issue new cash classes, whose nominal value reached 250 dinars, but in fact only worth 25 fils of dinar value during the 1970s.
When the United States occupied Iraq in 2003, and the collapse of the value of the Iraqi currency continued, the denominations of cash 5, 10 and 15 dinars without real value and there is nothing to buy them, so the country was quick to solve the problem by issuing new
categories of its currency are 50, 250, 500 and 1000 and 10,000 and 25,000 dinars .
The decline in the value of the currency and the issuance of new categories of them, the instability in prices and problems of exchange, buying and selling, and in the presence of a large block of cash, the number of papers 4 trillion paper, and worth more than 30 trillion dinars in various categories.
Therefore, the Central Bank of Iraq announced in 2011, that will be deleted 3 zeroes from the Iraqi dinar, in order to strengthen the value of currency and reduce inflation.
The deletion has not been implemented so far despite the announcement of Ali Alaq, Governor of the Central Bank of Iraq, in late 2016, that it will be early 2017, stressing that this support for the Iraqi dinar and make it a competitor to foreign currencies,pointing out that this project "strategic" will serve the economy of the country; The dinar will be included in the global basket of currencies in vital stock exchanges, he said.
Feasibility
"If the process is not accompanied by clear economic plans and reforms, I think it will not work, and there are many experiments in recent years that have proven," says economist Ahmed Musabah.
"Turkey's experience in this area was successful. People had to pay several million lira to buy bread in early 2000, so Ankara decided in 2005 to delete 6 zeros from the Turkish lira," he said.
Musabih pointed out that the deletion of zeros in Turkey was accompanied by plans and reforms covering most economic sectors, which led directly to the fight against inflation.
In contrast, the government of Zimbabwe decided to remove three zeros from the national currency (dollar) when inflation reached 1000% in 2003, but did not adopt sound economic plans and reforms, continued high inflation, which ended the destruction of the economy of the country and the devaluation of the local dollar, About the country in 2009.
Musabeh believes that removing zeros from the currency would have costs that could be burdensome for a country suffering from difficult economic conditions.
These costs include raising prices in shops and restaurants, creating problems in fixing prices, raising the costs of issuing new currencies, and decreasing exports due to sudden appreciation of the national currency.
To remove zeros, Mabahib said, a positive sign is the simpler implementation of financial transactions, the strengthening of the national currency and its value relative to other currencies, the ease of access to international credit, the restoration of identity and confidence in currency, the reduction of inflationary pressures, the control of the currency market and the government's overexpenditure
http://alkhaleejonline.net/%D8.....8%A7%D8%9F
But, what does it mean to cancel zeros from the currency? Has Venezuela ever taken this step? And what their feasibility and repercussions on the economy of the country and the citizen? .. "Khaleej Online" in the context of the following report in response to these questions.
The deletion of 5 zeros from any currency means that one million of this currency after the abolition of zeros will become only 10, and when the cancellation of 3 zeros will become 1000 and so on, and follow this procedure when the value of the currency collapses and their purchasing value is limited or not.
The most striking example of the collapse of the local currency is what happened in Zimbabwe. The last coin was worth $ 100 trillion, and that value did not buy a parsley package because of the inflation rate of more than 1000% 2009 and its replacement in US dollars and the South African Rand.
Venezuela has eliminated currency zeros in several countries. Zimbabwe has eliminated 3 zeros from its currency in 2003, Sudan has eliminated zero in 2007, Bolivia has eliminated three zeros in 2008, Romania has removed four zeros from its currency in 2005 and Turkey has written off six zeros from its currency in 2005.
But deleting zeros from the currency if not accompanied by economic reforms, it will not change anything, it is not much different from adjusting the size of the banknotes or changing their colors, or add a new fee or remove a picture of them.
Perhaps the most important experience in the deletion of zeros from the local currency was Turkey, with intentions in neighboring Iraq also, the two countries faced many problems and difficult; because of inflation and devaluation of the currency. The following is a review of the stations of these trials.
- Turkey
13 years ago, on 1 January 2005, Turkey announced the abolition of 6 zeros from its local currency (Lira). Inflation in the country has forced it to print large numbers of its currency and high values since 1981.
The currency of the value of 20.000.000, which used in Turkey the largest paper currency in the world, and create a number of zeroes the big problems in transactions, for example became difficult to read the numbers of taxi counters, and the list of goods, in addition to the serious arithmetic errors that resulted from the number of zeros .
According to statements by the current president Recep Tayyip Erdogan, in March 2008, to enter the toilet in Turkey before 2005, the Turkish citizen had to pay one million pounds, to turn this figure currently to one pound only.
The effect of canceling the six zeros from the Turkish lira was positive in terms of price stability, and the inflation rate fell to one percentage point.
But the deletion of zeros was not the only reason for the low inflation, it was accompanied by economic stability of the country, and the reform plans included most economic sectors, which led directly to the fight against inflation.
After Turkey's inflation rate was 70.8% in 2002 before the AKP came to power, this rate was 15.39% last July.
- Iraq
During the period of the total siege on Iraq between 1990 and 2003, a stifling Iraqi economic crisis emerged. The collapse of oil exports, the deterioration of industrial and agricultural production, the rise in unemployment and inflation, the non-payment of foreign debts and the chronic deficit of the state budget.
Therefore, it was obvious that the exchange rate fell sharply until the exchange value of the dollar reached 3000 Iraqi dinars in 1995.
Because of this situation, it was necessary to issue new cash classes, whose nominal value reached 250 dinars, but in fact only worth 25 fils of dinar value during the 1970s.
When the United States occupied Iraq in 2003, and the collapse of the value of the Iraqi currency continued, the denominations of cash 5, 10 and 15 dinars without real value and there is nothing to buy them, so the country was quick to solve the problem by issuing new
categories of its currency are 50, 250, 500 and 1000 and 10,000 and 25,000 dinars .
The decline in the value of the currency and the issuance of new categories of them, the instability in prices and problems of exchange, buying and selling, and in the presence of a large block of cash, the number of papers 4 trillion paper, and worth more than 30 trillion dinars in various categories.
Therefore, the Central Bank of Iraq announced in 2011, that will be deleted 3 zeroes from the Iraqi dinar, in order to strengthen the value of currency and reduce inflation.
The deletion has not been implemented so far despite the announcement of Ali Alaq, Governor of the Central Bank of Iraq, in late 2016, that it will be early 2017, stressing that this support for the Iraqi dinar and make it a competitor to foreign currencies,pointing out that this project "strategic" will serve the economy of the country; The dinar will be included in the global basket of currencies in vital stock exchanges, he said.
Feasibility
"If the process is not accompanied by clear economic plans and reforms, I think it will not work, and there are many experiments in recent years that have proven," says economist Ahmed Musabah.
"Turkey's experience in this area was successful. People had to pay several million lira to buy bread in early 2000, so Ankara decided in 2005 to delete 6 zeros from the Turkish lira," he said.
Musabih pointed out that the deletion of zeros in Turkey was accompanied by plans and reforms covering most economic sectors, which led directly to the fight against inflation.
In contrast, the government of Zimbabwe decided to remove three zeros from the national currency (dollar) when inflation reached 1000% in 2003, but did not adopt sound economic plans and reforms, continued high inflation, which ended the destruction of the economy of the country and the devaluation of the local dollar, About the country in 2009.
Musabeh believes that removing zeros from the currency would have costs that could be burdensome for a country suffering from difficult economic conditions.
These costs include raising prices in shops and restaurants, creating problems in fixing prices, raising the costs of issuing new currencies, and decreasing exports due to sudden appreciation of the national currency.
To remove zeros, Mabahib said, a positive sign is the simpler implementation of financial transactions, the strengthening of the national currency and its value relative to other currencies, the ease of access to international credit, the restoration of identity and confidence in currency, the reduction of inflationary pressures, the control of the currency market and the government's overexpenditure
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