Expert: Trade with banned countries is behind the rise in the dollar.. Al-Alaq: The exchange rate cannot be reduced

Expert: Trade with banned countries is behind the rise in the dollar.. Al-Alaq: The exchange rate cannot be reduced

2023-08-16 07:21

Expert - Trade with banned countries is behind the rise in the dollar.. Al-Alaq - The exchange rate cannot be reducedShafaq News/ The financial and economic expert, Abd al-Rahman al-Mashhadani, attributed, on Wednesday, the high exchange rate of the dollar in the Iraqi market to trade with countries that have international sanctions, however, the governor of the Central Bank of Iraq stated that the country has made great strides in applying restrictions on the supply of the US dollar However, the country faces an “uphill battle” in light of a banking system that is not used to strict supervision and currency smugglers sticking to their activities.

Al-Mashhadani said in an interview with Shafaq News agency, “The electronic platform made the financial transfer operations known to the sources, so that the person transferring and the bank to which the transfer is being transferred can be identified, after the exchange companies previously controlled the transfer operations out of control.”

He added, “Iraq imports from Iran annually from 8 to 10 billion dollars, which means that this requires providing between 21 to 25 million dollars per day for merchants,” noting that “the Pervezkhan border port exports about 3 million dollars per day, and the merchant buys dollars from the parallel market.” To finance this trade is not through the electronic platform of the Central Bank.

He pointed out, “The main problem is that Iraq has trade with the country that is banned and subject to sanctions by the United States of America, to which the dollar should not go, and this constitutes almost a quarter of Iraq’s trade, and this is also funded from the parallel market.”

Al-Mashhadani pointed out that “the state can solve the problem of the parallel market by finding a specific mechanism in agreement with the Americans to finance trade with officially banned countries.”

The US Treasury imposed sanctions on 14 Iraqi banks because of Iran’s dealings in dollars, noting that the move came after the disclosure of information indicating that the targeted banks were involved in money laundering and fraudulent transactions.

The price of the dollar in the parallel market increased dramatically when the electronic platform was imposed to meet the requests of companies, and to finance their imports of goods and services, which are subject to supervision by the Central Bank and the US Treasury.

For his part, the Governor of the Central Bank of Iraq, Ali Al-Alaq, described, in an interview with Reuters, combating the activity of currency smugglers in the country as a “really a battle,” explaining that “the beneficiaries of this situation and those affected by the new measures will try in various ways to continue their illegal activities.” .

Al-Alaq did not mention Iran by name, and indicated that he did not have data on the volume of dollars smuggled from Iraq to Iran or any neighboring country, including Turkey and Syria, before the United States tightened the rules in November.

He also said that Iraq has more than $100 billion in foreign currency reserves but cannot intervene freely in the market to lower the exchange rate because of those restrictions.

Al-Alaq also indicated that this procedure is related to transfers dating back to 2022 before the launch of new platform services aimed at improving transparency, pointing out that the Central Bank is carrying out a review of the banking sector and will implement new rules that he said are likely to cause the closure of some banks.

And he added, “It will be very normal in the coming period to see a decrease” in the number of private banks.

Al-Alaq continued, saying: “There are always side effects, but at the same time we have a responsibility to protect the country’s interests by trying to find the necessary means of monitoring so that we do not expose the country to any problems.”

Al-Alaq explained that the system, which is one of the features of economies dominated by informal sectors, was also used by thousands of small companies that are not registered with the state, a phenomenon widespread in Iraq that allows these companies to evade taxes and customs.

Since last January, the Central Bank of Iraq has asked banks to provide detailed information on the senders and recipients of money transfers through an online platform.

Al-Alaq said the companies began trying to use the platform in January, but US authorities approved less than 20 percent of the requests.

However, he indicated that this percentage has now risen to about 85%, which indicates greater familiarity with the new rules.

Al-Alaq stressed that the stricter rules, in addition to the government’s plans to promote digital payment, are forcing a greater transformation in the Iraqi economy in a country where cash and liquid money are still prevalent and most adults do not have bank accounts.

He continued, “It is not just an electronic platform, it will lead to a complete reorganization of trade and the movement of money, and the control of many avenues for suspicious activity.”