Iraq tries again to buoy dinar, stem dollar flight
BAGHDAD: Iraq’s central bank, struggling to stem an illicit tide of dollars into sanctions-bound Iran and Syria, has had some success in steadying its own dinar by pumping dollars to Iraqis through two state-run banks, traders and officials say. For months, the bank has been grappling with an increase in demand for the dollar at its daily auctions as traders snapped up the greenback for sale in neighbouring Syria and Iran, where international sanctions have spurred demand for hard currency. Iraq is recovering from decades of war and sanctions, and its economy is still very centralised. Oil accounts for 95 percent of government revenues. Late last month the central bank allowed US dollars to be sold at a fixed rate through two state-run banks, helping to push the dollar from 1,280 dinars to 1,210 dinars and closing the gap between the official rate and the market price. The central bank has started channeling $6m a day through the country’s biggest state banks Rafidain and Rasheed for them to sell to Iraqis planning to travel overseas, Mudher Kasim, deputy governor of the Central Bank of Iraq (CBI), said. The CBI holds a daily auction at which it sells the dollar for 1,166 dinars. The selling price through Rafidain and Rasheed is 1,189 dinars to a dollar while the market price is around 1,210 dinars to a dollar. The central bank usually sells about $250,000 to private banks and $75,000 to currency exchange and money transfer shops on a weekly basis. For months, traders have been snapping up dollars at the central bank’s daily auctions for sale in Syria and Iran. Seeking to clamp down, the central bank tightened rules in April over who could participate in these auctions. It also revalued the auction price of the dinar slightly higher to 1,166 per dollar from 1,170.