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The dollar is flying high and confusing monetary policy measures
Economical 2023/07/27
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Baghdad: Haider Fleeh Al-Rubaie
The process of increasing the exchange rate in the parallel market constituted a new shock to the financial and monetary policies, after they made great efforts during the past periods with the aim of aborting the rise of the dollar, whose exchange exceeded yesterday, Wednesday, the limits of 155 thousand dinars per 100 dollars, which was considered by specialists in the economic affairs as a “alarm”, stressing the need to take strict measures to limit the flight of the green currency against the dinar, and to find quick financial settlements that meet the needs of importers and traders, and to create a tangible balance between the supply and demand of the dollar, with the aim of controlling Prices of goods and materials from the "greedy" exploitation. Despite the continuous rises in the exchange rate, however, specialists in economic affairs minimized the risks of those rises on the local market, assuring to "Al-Sabah" that 75% of the materials and commodities in the markets enter Iraq at the official rate set by the Central Bank, and that merchants make their foreign transfers according to that price, while
25% of Iraqi trade is affected by the parallel exchange rate.
The efforts of the fiscal and monetary policies to undermine the dollar were matched by the efforts of the legislative and executive authorities with the aim of limiting the rise in the parallel exchange rate. While Prime Minister Muhammad Shiaa al-Sudani discussed, with the Governor of the Central Bank, Ali Al-Alaq, the measures taken to stabilize the currency in the local market, and discussed the facilities provided by the Central Bank, which includes allowing small merchants and importing individuals to finance their imports without the need to establish a company, the Parliamentary Finance Committee reviewed with Al-Alaq the means to achieve monetary stability and control prices. In contrast to the "cautious optimism" shown by a number of specialists regarding the effects of the exchange rate rise, others see the possibility of economic indicators, which they described as "painful", represented by entering the local market in the short term in a state of stagnation and high inflation rates.
In turn, the researcher on Iraqi and international economic affairs, Dr. Ali Daadush, in an interview he gave to "Al-Sabah", attributed the reasons for the price jumps of the green currency to the shortage in the supply of cash dollars compared to the volume of demand, which led to a rise in the exchange rate in the parallel market that finances foreign trade with the penalized countries.
Daadush pointed out that the reasons that led to the exchange rate rising again are many, but the most prominent of them is the speculation on which most transfer and exchange companies live, as these transfers take two directions.
The economic researcher believes that solutions in the short term may not be within reach, as most of the reasons that led to the dollar’s rise are external, especially after 14 Iraqi banks were punished by the US Federal Reserve, pointing out that the most effective solutions to confront the “dollar dominance” lie in activating and operating factories and laboratories to produce goods that are imported from countries banned from the dollar, and the government directs towards activating institutions and companies in the public and private sectors, operating and managing industries and working to increase their production, stressing that these steps will lead to eliminating the gap between the two prices. Official and parallel, as it will produce imported goods whose amounts are covered by dollars
cash.
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