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Seeds of Wisdom
Iraqi Dinar: IBBC ISSUES MAJOR NEW PAPER ON DE-DOLLARISATION OF IRAQ
Professor Frank Gunter publishes a new paper commissioned as part of a series by IBBC’s advisory council on the challenges of de-dollarisation for Iraq.
The Advisory Council members and IBBC members have actively contributed to the paper in the past 4 months. It will be presented online on the 18th June in a webinar and in person at the Spring Conference on 2nd July. The Arabic translation will be published soon.
Previous advisory papers include 2020, ‘Iraq 2020: Country at the Crossroads’, ‘C--------n Worse Than I--S: Causes and Cures Cures for Iraqi C--------n’, ‘Seaports and Airports of Iraq: Rules Versus Infrastructure’ and ‘Privatization of State-Owned Enterprises’.
Professor Gunter provides an analysis of the drivers of impact on the dinar exchange rate and examines how best to deal with the parallel market of dinars to dollars. He outlines the practical policy initiatives that should reduce the gap between the official and parallel exchange rates in the medium-term.
In particular he lauds the Government of Iraq on its commitment to tackle c--------n and to modernise the banking system in one fell swoop but warns of the pressure on the dinar exchange rate as budgets are overstretched and the new banking recipients (state banks) receive the liquidity to enable the economy to perform.
He writes ‘All three of these forces – the anti-c--------n effort, the banking liberalization, and the lavish 2023-2025 budget – will create challenges for the management of the dinar exchange rate. One could argue that over the last two decades the Government of Iraq (GoI) had little control over its exchange rate; that exchange rate policy was determined by other sectors of the political economy in Iraq.
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But even if this is true, the level of the exchange rate and changes in that level are believed by many Iraqis and foreigners as providing valuable insight into the quality of economic management in Iraq.
This importance is exemplified by the current efforts to de-dollarize the Iraqi economy while there is excess demand for dollars. This excess demand is shown by a parallel exchange rate of roughly 1500 dinars per dollar compared to the official exchange rate of 1310 dinars per dollar.
An important cause of this exchange rate gap is that the GoI, with the strong encouragement of the U.S. Federal Reserve, is attempting to reduce the use of the U.S. dollar in both Iraq’s internal economy and its external transactions. Since 2003, the U.S. dollar has facilitated economic growth in Iraq by providing a widely accepted medium of exchange for purchases as well as a reliable store of value for savings. In the long run, whether de-dollarization will have a significant adverse impact on the Iraq economy will depend on how rapidly the GoI can increase both the efficiency of alternative mediums of exchange and the perceived security of alternative stores of value.’
© Newshounds News™
Source: Iraq Business News
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To Boost Foreign Investments, Iraq signs Singapore Convention
From the UN Development Programme (UNDP). Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.
In a landmark move to attract foreign investors to Iraq, the country celebrated its signing of the United Nations Convention on International Settlement Agreements Resulting from Mediation (“Singapore Convention”).
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Under the patronage of H.E. Prime Minister Mohammed Shia Al-Sudani, the United Nations Development Programme (UNDP) and the National Investment Commission (NIC) of Iraq hosted a high-profile conference on mediation today [Wednesday 26th June, 2o24].
Creating an environment for global investors
Kick-starting the conference on behalf of H.E. the Prime Minister Mohammed Shia` Al-Sudani, the Advisor to the Prime Minister, Nasser Saleh Abdulnabi Al-Asadi reiterated the government’s unwavering focus on foreign investment.
“We are steadfast in our progressive reforms, striving to transform Iraq into an inviting and secure investment destination. Iraq’s accession to the Singapore Convention is a significant milestone, fortifying our efforts to build a robust business sector. We will persist in our endeavours to bolster investment, combat c--------n, and generate employment opportunities for our youth,” he said.
On April 17, 2024, Iraq took a significant step by signing the Singapore Convention, as the Convention eases enforcement of mediated settlement agreements, paving the way for enhanced international trade and commerce between countries.
“Iraq is ready to strengthen its collaboration with countries across the globe to foster investment as well as diversify and increase its trade, and the Convention is an important tool for us to operationalize this,” ` said Dr. Hayder Makiya [Makiyya], Chairman of the National Investment Commission.
Iraq enters its new chapter
The conference, generously backed by the European Union, was joined by the European Union Ambassador to Iraq, Thomas Seiler.
“We are working hand in hand with the government and UNDP to support the government’s ambition to make Iraq a secure and attractive destination for foreign investments, including from the 27 EU Member States. Effective mediation opens a new door for Iraq’s international trade and business.”
Through its Anti-C--------n and Commercial Dispute Resolution Initiatives funded by the European Union, UNDP has also been working with Iraqi universities to build the capacities of law students in commercial dispute resolution, including mediation.
“With the signing of the Singapore Convention, Iraq is committed to transforming the landscape of commercial cross-border dispute resolution which will significantly impact businesses engaged in international trade and commerce. We will continue supporting the Government in legislation and building the necessary institutional and human capacity to make mediation work.” said Auke Lootsma, Resident Representative of UNDP.
The hope is that Iraq’s signing of the Singapore Convention is the foundational beginning the country needs in order to attract and instill confidence in investors who wish to do business there – creating a climate that is conducive and safe for foreign investment.
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About the Singapore Convention
The Singapore Convention is a multilateral treaty that provides a uniform and efficient framework for the enforcement of international settlement agreements resulting from mediation. It applies to agreements concluded by parties to resolve commercial disputes and facilitates international trade by enabling easy cross-border enforcement of these settlements. As of 11 June 2024, the Convention has 57 signatories and 14 parties. Iraq is the most recent signatory of the convention.
About UNDP’s Commercial Dispute Resolution Initiative
To create an inclusive ecosystem for investors and boost foreign investment, UNDP has been strengthening commercial dispute resolution legislation and practices in Iraq. In addition to the support for mediation, the initiative includes technical support for drafting new law on arbitration in compliance with the UNCITRAL Model Law on International Commercial Arbitration and international best practices. By facilitating consultations, workshops, and discussions with a broad range of stakeholders, UNDP aims to enhance capacity building and mainstream efficient commercial dispute resolution practices across the country.
© Newshounds News™
Source: Iraq Business News
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DRAGON BOND: What it Means, How it Works
What Is a Dragon Bond?
A dragon bond is a long-term debt security issued by firms operating in Asian nations (excluding Japan), but denominated in foreign, stable currencies, such as the U.S. dollar (USD) or the Japanese yen (JPY).
Dragon bonds are Asian corporate bonds, ex-Japan, but denominated in a foreign currency.
Dragon bonds are denominated in currencies deemed to be more stable than the home currency to help mitigate the foreign exchange risk.
Dragon bonds, introduced by the Asian Development Bank (ADB) in 1991, are analogous to eurobonds issued by European corporations in foreign currencies.
Understanding Dragon Bonds
A dragon bond is a fixed-income security denominated in currencies deemed more stable than the home currency; it is seen as more attractive to foreign investors as a result. The rationale for structuring them to be as appealing as possible to investors outside of Asia is because they mitigate the foreign exchange risk that can impact returns as currency values fluctuate. Dragon bonds are similar to eurobonds in that they are denominated in foreign currencies that are liquid and stable, but in the Asian context instead of Europe.
Dragon bonds were first introduced in 1991 by the Asian Development Bank (ADB). Because of the foreign denomination, these can be more complex than other bonds because of international differences in taxation, regulatory compliance issues facing firms that issue them, plus limited liquidity in trading them in secondary markets.
Dragon Bonds and Currency Risk
Dragon bonds were created to broaden the market for fixed-income securities in Asia and develop more active Asian financial markets. Although Asian companies had issued bonds in local currencies, they appealed mostly to domestic investors limiting access to capital. Foreign investors were often reluctant to buy bonds dominated in currencies that could fluctuate rapidly. Currencies such as the U.S. dollar and Japanese yen were considered stable enough for accumulating assets.
For example, an Indonesian company might issue a 20-year bond denominated in Indonesian rupiah (IDR), with a coupon rate of 4-percent paid annually. If the U.S. dollar-Indonesian rupiah (USD/IDR) were 10,000 rupiahs per one U.S. dollar, then a 100-million rupiah bond would be the equivalent of $10,000. Each interest payment of 4 million rupiah would represent $400 at the time the bond is issued.
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To an Indonesian investor, an investment of 100 million rupiah would pay 4 million rupiah per year with return of principal after 20 years. But for an investor buying such a bond with U.S. dollars, an unfavorable movement between the relative value of the two currencies could create extra risk.
If in the next year the exchange rate shifted from 10,000 IDR/1 USD to 11,000 IDR/1 USD, then the first coupon payment of 4 million rupiah would only be worth only about $364 instead of $400 as anticipated when the bond was first issued. The bond’s 100-million rupiah face value would be worth about $9,091. And if the prevailing interest rate moves up, the value of the bond would be even lower.
However, a dragon bond denominated in USD, while still subject to interest rate risk, would not be subject to currency risk. The regional economy has changed significantly in the years since the introduction of dragon bonds in 1991, including the 1997 Asian financial crisis, and the growth of the Chinese economy. However, dragon bonds continue to help Asian markets attract more foreign investment.
© Newshounds News™
Read more: Investopedia
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Source: Dinar Recaps
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XRP News Today: Did the Binance Ruling Sink SEC Plans to Appeal?
XRP gained 0.28% on Saturday, June 29, closing the session at $0.4722.
SEC vs. crypto case-related news drove buyer demand for XRP.
On Sunday, investors should consider the possible influence of the latest court ruling on ongoing SEC vs. crypto cases.
Ripple Chief Legal Officer Stuart Alderoty shared the news of the court ruling, saying:
“For all the SEC has done to muddy the waters with its inconsistent legal theories, the Courts are seeing right through them. The Binance decision last night is long but absolutely worth a read.”
Read more: FX Empire
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Ripple vs SEC Case As of June 30, 2024: Torres’s Verdict On XRP Stands
The legal landscape surrounding cryptocurrencies in the U.S., especially XRP, is gaining much-needed clarity. Two recent court decisions have significantly impacted the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and Ripple and broader industry regulations.
In a significant victory for the crypto industry, District Judge Amy Berman Jackson has bolstered the legal precedent set by Judge Analisa Torres in the SEC vs. Ripple case. Judge Jackson’s decision in the Binance vs. SEC case centered on the classification of Binance’s BNB token.
The SEC argues that secondary sales of BNB by users on crypto exchanges constituted unregistered securities offerings. However, Judge Jackson disagreed, dismissing the SEC’s claim.
This ruling, shared on X by Fox Business journalist Eleanor Terrett, aligns with Judge Torres’ previous decision in the Ripple case.
Read more: Times Tabloid
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XRP Secondary Sales Deemed Non-Securities, Judge Torres’ Doctrine Stands
Judge Jackson’s ruling that XRP secondary sales aren’t securities boosts Ripple and sets a crucial precedent for the entire crypto industry.
Judge Jackson and Torres’ aligned decisions clarify that crypto assets traded by individuals on exchanges do not qualify as securities.
XRP price jumped over 1% after the ruling, aiming to regain $0.50, with increased interest from derivatives traders on OKX and BitMEX.
Judge Amy Berman Jackson has upheld Judge Torres’ doctrine, asserting that XRP’s secondary sales are not securities. This ruling came during the Binance vs. SEC case, where the SEC’s claim regarding secondary sales of Binance’s BNB was dismissed. To that end, the ruling by Judge Jackson, in concurrence with that of Judge Torres on the sale of XRP, sets an example in the crypto industry.
Read more: Crypto News Land
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Pro-XRP Lawyer Sees Binance Ruling as Boost for XRP Non-Security Status
Attorney Bill Morgan says Binance case ruling boosts XRP’s non-security status.
Judge Jackson cited Judge Torres’ Ripple case decision when dismissing parts of the SEC’s case against Binance.
Morgan highlights that the ruling aligns with Judge Torres’ interpretation of the Howey test.
Read more: Coin Edition
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XRP Lawsuit: Ripple Notches Massive Wins as CEO Brad Garlinghouse Clarifies XRP’s Security Status
Ripple Labs CEO Brad Garlinghouse has taken swipes at news outlets over inaccurate reporting of a court decision involving XRP and the US Securities and Exchange Commission (SEC).
The fiasco began following a ruling by Judge Phyllis Hamilton of the US District Court for the Northern District of California, which threw out a class action suit against the issuers of the XRP token. While considered a massive win for Ripple Labs, the judge allowed an individual state law claim to proceed to trial based on alleged “misleading statements” made by Garlinghouse in 2017.
As XRP’s community celebrated the dismissal of securities law violation, CoinDesk and a raft of crypto news outlets reported that Hamilton’s decision could imply that XRP may be a security. The reporting triggered a stir in the ecosystem as XRP enthusiasts believe the question of the asset being a security was finalized in a 2023 decision by District Judge Analisa Torres in New York’s Southern District.
CoinDesk described the ruling as a “fly in the ointment,” but the report elicited fierce kickbacks from XRP’s community, with Garlinghouse leading the charge. According to Garlinghouse on X (formerly Twitter), Garlinghouse described the report as “embarrassing,” noting that Hamilton did not expressly term XRP as a security.
Read more: ZyCrypto
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Source: Dinar Recaps
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