This is the story of the Iraqi dinar tottering against the dollar: the worst is yet to happen

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[size=52]This is the story of the Iraqi dinar tottering against the dollar: the worst is yet to happen[/size]

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[size=45]The English-language newspaper “The National” stated that the recent measures taken by the US authorities, in which they tightened the process of transferring dollars from Iraq to Iran, led to a decrease in the value of the Iraqi dinar on the black market, noting that for years dollars were being transferred to Iran and Syria, while they were under US sanctions, through foreign currency auctions run by the Iraqi state.[/size]
[size=45]While the report, translated by Shafaq News Agency, indicated that the Iranian-backed Iraqi government is making efforts to control the exchange rate in order to contain the growing public anger due to the increase in commodity prices, the owner of an exchange company in Baghdad, Durgham Hamid, was quoted as saying that the exchange rate The dollar on the black market was fluctuating around 1,550 Iraqi dinars from about 1,470 dinars, adding that the dinar has been faltering against the dollar since the beginning of this month, which "created chaos in the market."[/size]
[size=45]He stated that the Central Bank of Iraq had introduced, since 2004, the mechanism of auctioning foreign currencies as one of the tools in order to achieve monetary stability, and through these auctions, it allowed the government to succeed in controlling the exchange rate on the black market.[/size]
[size=45]However, the report indicated that for years, the official rate adopted by banks and exchange companies was 1182 dinars, while the street price was about 1200 dinars.[/size]
[size=45]However, this process is fraught with accusations of corruption, money laundering, and the transfer of dollars to the Iranian and Syrian neighbors, through the use of forged bonds. That is why the United States blacklisted a group of Iraqi banks that deal mainly with Iran, as it imposed, for example, sanctions on the Iraqi Al-Bilad Islamic Bank because of its dealings with the Iranian Revolutionary Guard in May 2018.[/size]
[size=45]The report continued that in light of the liquidity crisis resulting from the decline in oil prices in the international market, the Central Bank of Iraq reduced the value of the dinar in December 2020 to 1460 dinars to the dollar for banks and 1470 dinars for individuals, as the interim government considered at the time that this step would work. To limit the escape of the “cheap dollar” out of Iraq.[/size]
[size=45]However, the report indicated that this step did not stop the flow of hard currency, which is greatly needed.[/size]
[size=45]It was reported from an official in the central bank and an Iraqi deputy that the US ambassador to Iraq had submitted complaints to Iraqi officials on several occasions regarding the continued sending of dollars to Iran, but the government of Muhammad Shia al-Sudani, who assumed power at the end of last October, did not intend to take any action. .[/size]
[size=45]The report also quoted a central bank official as saying, “When no action occurred on the part of the government, the (US) Federal Reserve Bank began applying audit procedures on foreign transfers, which led to a delay in the process of releasing funds by the United States for Covering imports and other needs.[/size]
[size=45]How is the process going?[/size]
[size=45]The report stated that every dollar that Iraq earns from the sale of oil enters an account at the Federal Reserve Bank in New York, then Iraq withdraws government salaries and expenses for what it imports, noting that the Federal Reserve Bank in New York is the one that provides Iraq with hard currencies at the request of the Iraqi government.[/size]
[size=45]The report added that while some of this money is used to cover government imports and other requirements that it needs, much of this money is passed on to commercial banks, with the ostensible aim of covering the costs of private sector imports, a process that money laundering cartels in Iraq controlled for some time. long.[/size]
[size=45]The report pointed out that the remaining funds should be added to the international reserve.[/size]
[size=45]Al-Sudani announced earlier this month that, thanks to the increase in oil revenues, the Central Bank now possesses about $96 billion in foreign exchange reserves.[/size]
[size=45]And according to another owner of an exchange company, who asked not to be identified, the Central Bank sold, on average, about $240 million to $250 million a day, explaining that only 10 to 20% of this money was spent for distribution to banks and exchange companies and then to individuals, while The remaining amount was sent to bank accounts in Dubai, Turkey, Oman and China to cover private sector imports.[/size]
[size=45]The report quoted the owner of an exchange company as saying, "Iraq has no problem with money at all, because it has good reserves, and it seems that the issue is politically motivated because the Americans are upset."[/size]
[size=45]The Iraqi cashier stated that during the past 19 years, the (US) Federal Reserve Bank has never deliberately delayed any request or transaction from Iraq, adding that the US bank was “approving any invoice immediately,” but the Americans started since the beginning of this month “In applying audit procedures to foreign transfers, the new process caused a delay in each transaction for up to two weeks.”[/size]
[size=45]The owner of the exchange company also pointed out that most of the requests were rejected because it was suspected of being linked to some banks in Iran.[/size]
[size=45]The report indicated that in light of this, daily transactions declined from about 200 million dollars to between 20 and 30 million dollars per day.[/size]
[size=45]The Iraqi cashier explained that "the (financial) reserves in accounts abroad have dried up, which has caused an increase in the demand for dollars in the local market to cover imports."[/size]
[size=45]In order to curb prices on the black market, the government asked the Central Bank of Iraq to take urgent measures in order to compensate for the dollar shortage in the local market, and in this context, the central bank reduced the exchange rate for individuals from 1470 dinars to 1465 dinars to help them secure travel costs for Hajj and treatment and the study.[/size]
[size=45]In addition, the government asked the central bank to help private banks strengthen their reserves of foreign currencies other than the dollar, such as the Chinese yuan, the euro, the UAE dirham and the Jordanian dinar, but all these measures did not succeed in strengthening the Iraqi dinar against the dollar.[/size]
[size=45]The report quoted Hamid as saying that he is not optimistic, "and we believe that the worst has yet to come, unless the government implements urgent, immediate and effective measures."[/size]
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