The price of the dollar in Iraq is under US federal pressure and smuggling

The price of the dollar in Iraq is under US federal pressure and smuggling

12-30-2022

The high exchange rate of the dollar against the Iraqi dinar raised concerns by the official and popular circles in Iraq, after the US Federal Bank set strict control conditions that oblige the currency sale window to display lists of sold dollars that include the names of the persons and beneficiaries to indicate the Federal Bank’s position on the safety of the purchase process for the party submitting the request. , and not being linked to entities subject to international embargoes or sanctions by the US Federal Reserve, and this action prompted the central bank to wait a minimum of seven days to complete the sale, according to economists.

And the exchange rate of the dollar continued its rise against the Iraqi dinar in the main stock exchange in the capital, Baghdad, since days, as it approached the barrier of 160 thousand dinars for the $100 category, and this rise is the first of its kind since 2003 until now. The rise of the dollar in the Iraqi local markets caused an increase in the prices of commodities and foodstuffs.

In an attempt to limit this crisis, the Central Bank of Iraq announced a package of decisions to control the exchange rate of the dollar. The Board of Directors of the “Central Iraqi” discussed the repercussions and indicators of the rise in exchange rates in the local markets and the temporary pressures the foreign currency exchange rate has been exposed to for days resulting from internal and external factors, given the adoption of mechanisms to protect the banking sector, customers and the financial system, and since the requirements of foreign trade (for the purposes of Documentary credits or transfers) are fully covered by the official rate, i.e. 1465 dinars to the dollar for documentary credits and 1470 dinars to the dollar for transfers.

Banks review

The Central Bank of Iraq called on merchants to review banks directly and not resort to brokers and speculators to avoid charging their imports with undue commissions and expenses, referring in this regard to what was issued by the Council of Ministers in its Resolution 351 of 2022 regarding non-payment of customs duties and amounts of tax secretariats in advance, which will lead to a reduction Excess loops, easing procedures, and removing costs resulting from pre-demarcation problems. In the latest decision, the Central Bank of Iraq announced the facilitation of procedures for travelers to obtain foreign currency (dollars), and said, in a statement, that “the procedures were facilitated by expanding the outlets for selling foreign currency in cash by increasing the shares of bank outlets, and an increase in their shares will be initiated.” “.

On Tuesday, December 27, Prime Minister Muhammad Shia al-Sudani met with the Governor of the Central Bank of Iraq, Mustafa Ghaleb Makhaif, and al-Sudani listened to a detailed presentation from the governor regarding the rise in the foreign currency exchange rate and the most important measures taken by the bank in this field.

The Prime Minister urged the Central Bank to achieve general stability of prices and the exchange rate in accordance with the tasks stipulated in Articles Two and Three of the Iraqi Central Law, which stipulate that the Central Bank aims to achieve stability in the local exchange rate, organize and monitor the work of banks, enhance the safety and efficiency of payment systems, and develop the payments system, and stressed Al-Sudani stressed the need to take the necessary measures to prevent illegal speculation and everything that harms the local market and leads to higher prices.

electronic cards

He also urged activating the steps to sell foreign currency at the official rates to citizens through buying with electronic cards, opening sales outlets for travelers, or clients outside Iraq, or financing foreign trade, according to the fundamentalist contexts and international standards for opening documentary credits and remittances.

The governor of the bank presented the Prime Minister with a positive position on the financial situation, stressing that the crisis regarding foreign currency is an emergency crisis for technical reasons, and coincided with the work on the new electronic platform and the delay in transfers due to the Christmas holidays, and the governor praised Cabinet Resolution No. Customs for goods entering from government ports, preventing double taxation and collecting it according to the approved contexts at border crossings.

Great economic recession

A member of the Parliamentary Finance Committee, Jamal Cougar, confirmed that Iraq is on the verge of a major economic recession, attributing the reason to the fluctuation of dollar prices against the dinar, and he said in a press statement that “the current fluctuation of the dollar exchange rate against the Iraqi dinar will lead to an economic recession, and therefore will reflect negatively on the country’s economy.” That “the Iraqi citizen is a victim of this fluctuation and we await the actions of the Central Bank and the Ministry of Finance in the price of the dollar.” He pointed out that “the foreign investor and the Iraqi trader are afraid of practicing their work with the fluctuation of the dollar, which prompts them to stop their investments and wait for the government’s measures, thus stopping the wheel of the economy.” He called The concerned authorities called for “taking decisive measures to end this fluctuation and put an end to it and restore confidence in the Iraqi dinar.”

currency smuggling

In addition, a member of the Parliamentary Integrity Committee, Representative Ali Saadoun Al-Lami, revealed the reasons for the rise in dollar prices in the local markets, and indicated that smuggling the currency outside the country and its distribution is a major reason for the increase, stressing that neighboring countries are the only beneficiaries of this matter, and Al-Lami said in a statement. televised, “The data indicate another increase in the dollar, and the current government is unable to find solutions,” noting that “the main problem in the increase in dollar prices came as a result of currency smuggling to neighboring countries.” He said, “The US Federal Bank wants to control the sale of currency by subjecting it to for the single window,” noting that “Iraq spends approximately 70 or 80 million dollars from the currency, while central bank statistics indicate the disbursement of more than 250 million.” He continued, “The government has not taken any measures to control this matter, and the procedures of the Federal Bank.” Represented by launching a form specifying the sale of the currency for the purpose of controlling the auctions of selling the currency to know the ways in which it was used or usedissuing authority.”

In a related context, Representative Durgham al-Maliki revealed existing Iraqi moves to negotiate with the American side to organize the process of dealing with the dollar and apply “proper” procedures in this regard, which will lead to a re-lowering of dollar prices, at a time when it was considered that the matter might lead to a reduction in the exchange rate to 120 thousand. Dinars within three months, and Al-Maliki said in a press statement that “a special session brought him together with about 23 deputies from Basra Governorate, the Governor of Basra, and Prime Minister Muhammad Shia’a Al-Sudani, and they talked explicitly about the issue of dollar prices.”

He explained that “there are processes of projection and questioning of our previous positions wishing to reduce the exchange rate,” noting that “MPs and citizens, in general, when they are outside the scope of responsibility do not know anything about the mechanism for controlling dollar exchange rates, but after a person is in a position of responsibility as the prime minister, He discovers that the government does not have much power over the dollar because it is produced and exported from the United States and it has full power over its currency.” He also said, “We must organize ourselves from the inside, because Iraq today is accused of being a country through which currency is suspected of being smuggled, so there are negotiations.” A list with the American side to apply the proper conditions for dealing with the dollar, which will eventually lead to a gradual decline in dollar prices to normal, within three months from now.

Regarding the normal situation that al-Maliki intends, he considered that “the price of 140,000 dinars is not a normal situation. And the Prime Minister supports this approach through understanding with the American side in this regard.

temporary condition

The Iraqi economic researcher, Bassam Raad, indicated that monetary policy is between a rock and a hard place, as monetary policy occurred between the anvil of the rentier Iraqi economy, which relies heavily on foreign imports to cover the total demand for goods and services, whether consumer, intermediate or productive, which constitutes a great demand for foreign currency to satisfy the market’s desire for currency to finance imports in addition to making monetary policy vulnerable to external shocks due to fluctuating oil prices or rising commodity prices in international markets, and between the hammer of the Federal Bank as all the country’s money managed by the Central Bank for the benefit of the government of the Republic of Iraq is currently in The American Federal Bank, which provides protection for these funds, and the economic researcher confirmed that the recent scandal known as the “scandal of the century” prompted the Federal Bank to set strict control conditions that oblige the currency sale window to display lists of sold dollars that include the names of persons and entities.The beneficiary to indicate the position of the Federal Bank on the integrity of the purchase process for the party submitting the request and its non-association with entities subject to international embargoes or sanctions by the US Federal Reserve, and this procedure prompted the Central Bank to wait for a period of seven days, as a minimum, to complete the sale process.

Raad stressed that these measures contributed to pushing the exchange rate gap in the parallel market to rise by a standard rate of more than five percent. Documentaries, and 1470 dinars to the dollar for remittances, and the reserves of the Central Bank are the highest since 2003, as they exceed 90 billion dollars and are sufficient to defend the official exchange rate.

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