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Steps to enhance {the strength of the dinar} and diversify monetary reserves
Economical 2023/02/25
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Haider Fleeh Al-Rubaie
And the mainstay of the emirate
The Monetary Authority in Iraq expanded its efforts to strengthen the strength of the dinar and diversify cash reserves, after issuing the second package of facilities for obtaining foreign currency, during which it organized foreign trade financing operations from China directly and in the Chinese yuan currency, in a step explained by a number of specialists in the matter. Economic, as a gesture that may aim to reduce the "dominance" of the dollar over the Iraqi economy.
Governmental directives and central bank decisions were welcomed by a number of economists, especially the decision to reduce the sale of foreign currency against the dinar, stressing that these steps would control inflation rates, which witnessed clear increases as a result of the Iraqi market’s almost total dependence on imported materials and commodities, pointing out The survival of the parallel exchange rate rise is a temporary matter resulting from the regulatory conditions taken by the Central Bank in managing external transfer requests submitted by local banks.
Despite the "two packages" issued by the Central Bank, and the accompanying government measures that succeeded in aborting the rise in the exchange rate of the dollar, however, the foreign currency, and since the decision to sell it at an official price of 1332 dinars, is still "climbing", recording an exchange rate of 153 thousand dinars per hundred. Dollars, which affected (according to observers) commercial activity and the movement of buying and selling various materials in the local markets, prompting the Central Bank to allocate hot phone numbers to receive public remarks, complaints and inquiries related to outlets selling foreign currency in dollars.
The economist, Nabil Al-Marsoumi, commented on the Central Bank’s decision to regulate the financing of foreign trade with China in the yuan currency, saying: “Iraq began diversifying its cash reserves five years ago, but the dollar prevails because oil revenues are in dollars and has only a few Chinese yuan, as it tries Iraq today is restoring the value of the dinar through a strategy that is now being pursued by other official banks in the Middle East, which includes relying on the Chinese yuan currency for the purpose of trade exchange with China, in addition to the European euro, the Emirati dirham and the Jordanian dinar.
Al-Marsoumi believes, "The Iraqi authorities are seeking to provide other foreign currencies for local dealings besides the US dollar, as many countries have begun to take the same steps as the Central Bank of Iraq and others have already begun to implement them, as Saudi Arabia issued a decision that includes obtaining the Chinese yuan instead of the US dollar." The dollar in exchange for oil sold to China, while Egypt decided to replace the security bonds with the yuan currency instead of the dollar.
Despite the importance of these steps, however, Al-Marsoumi pointed out that “in light of the pricing of oil in dollars and as long as oil exports dominate Iraqi exports, with the disappearance of non-oil exports, it becomes impossible for Iraq to liberate itself from the dollar, as Iraq ultimately needs the dollar to obtain yuan."
Contrary to the previous opinion, the economist, Nabil Jabbar Al-Tamimi, explained in a statement to “Al-Sabah” that “the purpose of the recent Central Bank decisions to finance foreign trade with China in the yuan currency aims primarily to pass remittances away from the dollar, and the requirements of that currency.” ".
Al-Tamimi indicated that, behind this step, the central bank aims to pass remittances worth 5-10 billion dollars with China, to finance trade and enhance commodity exchange for the Iraqi private sector, noting that the Iraqi central bank will use for that process the cash reserves available in Chinese banks, Which is equivalent to about one and a half billion dollars, which I expect to increase in the future.”
In the same context, the specialist in economic affairs, Dr. Ahmed Al-Rawi, praised, via “Al-Sabah”, the decision to adjust the exchange rate, describing it as “a political and economic decision at the same time. The dollar is in compliance with the decisions aimed at preventing the smuggling of the dollar abroad,” indicating at the same time, that “the persistence of the gap between the new official price and the parallel price in the market comes because the currency window has adopted electronic transfers, and this may determine who can obtain the official dollar, including small merchants and citizens, Which will push them to resort to asking for dollars from the parallel market, and thus an increase
exchange rate.”
Dr. Al-Rawi also indicated that there is a cash mass in Iraqi dinars that exceeds 90 trillion dinars, most of which are held by citizens, indicating that this hoarding is caused by their lack of confidence in the Iraqi banking system, and therefore citizens, in anticipation of a decrease in the dinar, try to transfer their savings to dollars, which increased the demand for the parallel market, suggesting control In view of the continued high exchange rate, work to diversify the window to include some citizens for the purpose of travel and for some merchants who deal in cash more than electronic transfers, while tightening control over smuggling and money laundering, which is the main reason for the demand for the dollar and its high price.
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