Does the Central Bank of Iraq control transfers with the availability of hard currency?

Does the Central Bank of Iraq control transfers with the availability of hard currency?

7-27-2023

BAGHDAD – The Governor of the Central Bank of Iraq, Ali Al-Alaq, indicated that there is no currency problem in Iraq, and that Iraq’s reserves of foreign currency amount to more than 113 billion dollars, in response to the protest of dozens of Iraqis in front of the bank’s headquarters against the continuing rise in the exchange rate of the dollar, calling on the government Finding solutions to the problems of the Iraqi currency.

This comes at a time when observers are wondering whether the currency surplus means that the Central Bank of Iraq controls the transfers, and that the Iraqis get the currencies they want completely freely, while the United States puts its hand on the various transfer operations, and obliges the Central Bank and the Iraqi government to take their actions.

In an attempt to alleviate the anger of the street, Al-Alaq said in an interview with the Iraqi News Agency that the high exchange rate of the dollar against the Iraqi dinar was caused by the failure of merchants to enter the bank’s electronic platform, and that “some of those who want to buy dollars do not adopt the correct methods by going to the electronic platform.” .

Observers believe that this is an illogical explanation aimed at relieving pressure on the government after Iraqis began complaining about the repercussions of the currency crisis on their lives.

On Wednesday, the demonstrators raised banners calling on the Iraqi government to take strict measures to control the exchange rate of the dollar, denouncing the continued deterioration of their living conditions.

The exchange rate of the dollar in the parallel market in Iraq jumped to unprecedented levels, as it exceeded the barrier of 155 thousand dinars for every 100 US dollars, while the official rate in the Central Bank of Iraq reached 1320 dinars to the dollar.

The rise in the exchange rate of the dollar led to confusion in the market and an increase in commodity prices, which raised the concern of citizens.

The dinar crisis intensified after the Central Bank of Iraq announced new controls to control dollar exchange rates after the US Treasury imposed restrictions on 14 Iraqi banks preventing them from dealing in dollars to transfer them to Iran and other countries subject to sanctions in the Middle East.

Last week, the American newspaper “The Wall Street Journal” quoted US officials as explaining this step, as it came after the disclosure of information indicating that the targeted banks were involved in money laundering and fraudulent transactions.

And called on the Iraqi banks targeted by US sanctions to lift the damage that affected them. And it said in a statement that it “works under the umbrella and oversight of the Central Bank of Iraq and provides various banking services, including coverage of foreign imports,” and that it “is fully prepared to undergo auditing of all its transactions, whether from the Central Bank of Iraq or from international auditing companies.”

This statement would increase the embarrassment felt by Al-Alaq and the Central Bank in a way that shows them the position of those who do not control the evaluation process and determine who deserves and who does not deserve.

The Central Bank of Iraq sought in a previous statement to reassure these banks and the parties behind them, but away from the US-imposed controls.

The statement said, “Banks deprived of dealing in US dollars enjoy complete freedom in dealing in Iraqi dinars with various services within the Iraqi banking system, in addition to their right to deal internationally in currencies other than the US dollar.”

And the Finance Committee met in the Iraqi parliament with Al-Alaq “to discuss the issue of dollar exchange and the central bank’s work mechanism to control the market.”

The head of the committee, MP Atwan Al-Atwani, said that the deputies stressed the necessity of “reviewing the measures taken by the Central Bank to maintain the stability of exchange rates and the market.” He added, “These measures are no longer sufficient, and new measures must be taken, to ensure the restoration of market stability and control of the dollar’s exchange rates.”

He warned of “the sensitivity of the situation, especially since this crisis is no less dangerous than the terrorist challenge, as it threatens the existence of the state, especially in light of the presence of an external factor working hard to destabilize political and security stability.”

The financial expert, Sadiq Al-Rikabi, said that the penalties were taken against the background of “unjustified bills,” and there is no evidence to specify the destinations to which the dollar was transferred from these banks, or proof of goods in exchange for them.

Surplus currency, does it mean that the Iraqis get what they want in terms of currencies, while Washington places its hand on the various transfers?

He added that the US Treasury Department had been waiting for months for the Iraqi financial institution to provide it with proof and evidence of those invoices, but it did not get anything.

Most of the smuggling operations take place based on import documents for goods that actually enter the country in order to sell them in dinars, but many of the import operations are fictitious. Other means of smuggling include buying commodities at double prices, or inferior commodities, and the aim is to turn their bills into dollars, before they are smuggled abroad.

According to expert Manar al-Obaidi, during the year 2020, for example, Iraq transferred about $40 billion for the purpose of importing various goods, but the market received goods worth $15 billion, which means that the remaining amount was smuggled to external parties.

“When the bank says it sold $250 million, customers may not actually receive only $150 million from it,” former central bank official Mahmoud Dagher said in a televised statement.

Observers say that the sources of planning and covering up the smuggling operations are multiple, and they include senior government officials, party leaders and members of parliament, and “Islamic” and private banks are only the last mediating party in the process, which makes banning some of them meaning nothing on the ground.

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