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The Iraqi dinar fell by 14%.. Monitoring the decline of Middle Eastern currencies
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Baghdad Today - Follow-up
Today, Tuesday, the Saudi newspaper, Al-Sharq Al-Awsat, wrote a report on the collapse of monetary currencies in the countries of the region.
The newspaper, and its follow-up (Baghdad Today), stated that “at a time when the year 2022 witnessed an unprecedented decline in the exchange rates of a number of national currencies in some Middle Eastern countries, most notably Egypt, Turkey, Sudan and Iraq, the exchange rates of the region's currencies experienced a state of erosion of their value compared to the US dollar, while some of them witnessed very sharp turbulent declines, as is the case of the Iranian rial and the Lebanese pound.
And she continued, "Despite the diversity of the reasons that led to these declines, between political and economic, and the monetary policy of central banks, they agree on several factors that led to these declines, most notably the continuous rise in the interest rate At an accelerated pace, the rise in inflation rates, as well as political tensions, in addition to market speculation. Black markets, market manipulation, smuggling and the fragility of economies also contributed to the shaky landscape.
And she continued, "Despite the diversity of the reasons that led to these declines, between political and economic, and the monetary policy of central banks, they agree on several factors that led to these declines, most notably the continuous rise in the interest rate At an accelerated pace, the rise in inflation rates, as well as political tensions, in addition to market speculation. Black markets, market manipulation, smuggling and the fragility of economies also contributed to the shaky landscape.
According to its report, the newspaper monitored the reality of the most prominent currencies in the region during the year, accompanied by an analytical reading of what happened:
- Half of the value
The region's currencies have significantly decreased in value, as the Egyptian pound has lost against the US dollar since the beginning of the year by 58 percent, and by a similar rate, the Turkish lira fell against the dollar. By 41 percent, the Iraqi dinar also recorded a decline against the dollar with a high fluctuation rate of 14 percent, while the exchange rate of the Iranian Riyal witnessed severe swelling at the end of this year, with it declining greatly before returning to stability with a slight loss of 0.61 percent, and the Sudanese pound recorded during 2022, it decreased against the dollar by more than 30 percent, while the Lebanese pound was blown by the winds of price decline due to the black market, which plunged in value by less than a third of the official price.
Speculation and smuggling
In addition to the fragility of the economies in the region, the escalation of global interest rates is accompanied by local factors that put pressure on the price of national currencies, as the factor of speculation as well as the smuggling of hard currency appears in the scene of the turbulence of national currencies in the region.
And the Central Bank of Lebanon continued to raise the exchange rate of the exchange platform against the US dollar, to reach last week to 38 thousand Lebanese pounds per dollar, from 31.2 thousand pounds, justifying this by controlling the exchange rate of the dollar in the parallel market, which rose during the holidays due to speculation and smuggling operations. The dollar is off limits.The Governor of the Banque du Liban, Riad Salameh, confirmed, in a statement, that the depreciation of the Lebanese pound in the parallel market during the festive period is due to speculation and the smuggling of dollars outside the country.
He pointed out that this rise caused inflation in the markets, which harmed the Lebanese citizen, since prices in Lebanon are linked to the exchange rate of the dollar. Limits in numbers that they apply to all Lebanese banks to pass these operations. This is until further notice.
In the past days, the exchange rate of the dollar in the parallel market (the black market) exceeded 47,000 pounds per dollar, and it declined again later quickly, reaching the limits of 43,000 pounds.
- International procedures
On the other hand, some international measures and the political factor in some countries in the region have contributed to disturbing the behavior of national currencies, as the currency markets in Iraq have witnessed, since the beginning of the year, a disturbing, fluctuating decline in the value of the local dinar, especially after the new measures imposed by the US Federal Bank on its Iraqi counterpart. Control conditions, at the beginning of this month, which prevented money transfers and sales of dollars in favor of banks and companies accused of money laundering for the benefit of armed parties.
The prevention of these banks from dealing in US dollars caused a scarcity of hard currency supply in the market, so that its exchange rate jumped to more than 158 thousand dinars, amid expectations that it would reach the barrier of 160 thousand soon. To reduce the amount of dollars from 250 million to about 50 million per day, in just one month.
And Iraqi sources indicated that Iraqi banks were unable during the past two weeks to adapt to the American conditions for buying dollars related to money laundering and reliable financial assets.
Violent fluctuations
In the scene of strict regulatory conditions, the Iranian rial continues to record an abnormal state of turmoil with violent fluctuations against the US dollar, especially in the last month of the year, breaking records with the imposition of new sanctions on Tehran following the suppression of popular protests that erupted more than a year ago. 3 months.
And the Iranian currency crisis toppled the governor of the central bank, as Iran finally appointed Muhammad Reza Farzin as the new governor of the central bank, instead of Ali Saleh Abadi, who appeared before Parliament, and partly blamed anti-government protests for the currency's Drop to record levels, and he also talked about high prices. Interest in more than 90 countries around the world.
In May 2018, the currency was trading at about 65,000 riyals to the dollar, ahead of the United States' withdrawal from the Iranian nuclear deal with world powers and the re-imposition of sanctions on Iran. The dollar was at 250,000 riyals when Ibrahim Raisi took office in August last year.
The price of the Iranian currency witnessed a fluctuating path throughout the negotiations aimed at reviving the nuclear agreement, which began in Vienna in April 2021 before faltering last March. After negotiations faltered until the outbreak of protests in Iran, the Iranian currency lost 40 percent of its value, as it traded at 360,000 riyals at the beginning of the protest movement on September 17.
Despite the Iranian currency's return to cohesion, the riyal has lost nearly two-thirds of its value against the dollar since the nuclear negotiations faltered, according to Radio Farda, which is funded by the US State Department, before the central interventions and pushing its price towards stability at the end of the year, losing only 0.61 percent of its value. .
Experts expect the Iranian currency to decline with the continuation of the unrest and the country's increasing isolation, amid Western criticism of the crackdown launched by the Iranian authorities against the protesters and its relations with Russia.
These relations include the drones that Iran reportedly sold to Russia and used in the war in Ukraine.
- public and private
In explanations of the current situation, economic analyst Abdulaziz Al-Sanad said that the depreciation of the exchange value of some currencies is due to two types of reasons: public and private factors, indicating that the general causes are not directly responsible for which governments are responsible, while the special reasons are up to each country accordingly. separately, and the central banks and governments of those countries are fully and directly responsible for them.
Al-Sanad added that the general causes are the high rates of inflation globally, and the increasing raising of interest rates by the Federal Central Bank in the United States of America, pointing out that the abuse of governments and the taking of precautionary and preventive measures Measures fall on the shoulders of governments and countries to mitigate any negative impact that may occur on the value of money. currency and its purchasing power.
Economics and debt
For his part, financial analyst Hamad Al-Olayan explained that national currencies are generally considered the main interface for any economy, and they give a general perception of the shape of the economy from the inside, pointing out that the reasons for the decline of national Currencies in recent times are similar in their factors among most countries of the world except for the euro region.
Olayan stressed that the reasons for the depreciation of the currencies of the Arab countries and Turkey against the dollar are due to the accumulation of debts and the depletion of reserves of foreign currency "dollars", as well as the economic consequences of the Corona pandemic.
He said that the pandemic led to a deficit in the budgets of a number of those countries, in addition to the rise in product prices in a way that caused currencies to lose their purchasing value in an unprecedented way.
Interest and inflation
Olayan stressed that high inflation, high interest rates and political tensions in Europe played an important role in putting pressure on currencies not supported by industries or petroleum products.
Al-Olayan believes that the current data indicates that it is difficult for these currencies to return to their previous levels at the beginning of the year, and that it may take many years, until the economic stability of these countries returns and the pressure on major foreign countries returns. currencies, the most important of which is the "euro", eases.
Weakness of the economy
Al-Sanad returns, regarding the special reasons for the decline of the national currency, such as a state of disturbance in the value of the Lebanese pound, to the failure to manage financial and monetary policies appropriately, procedurally and temporally, indicating that since the beginning with the emergence of weakness in the Lebanese economy and the decrease in cash flows from abroad, the accumulation of debt, the depletion of hard currencies, the expansion of unregulated parallel markets, and the increase in smuggling through illegal outlets, accompanied by the absence of a comprehensive financial reform programme, and weakness in debt restructuring.
Al-Sanad indicated that the Lebanese pound has lost more than 90 percent of its value since the start of the economic crisis in 2019.
With regard to the Egyptian pound, Al-Sanad indicated that the overall inflation rate in Egypt reached 20 percent, especially in food and real estate, pointing out that the Egyptian Bank's decision to implement a flexible exchange rate system for the pound against foreign currencies led to the decline of the Egyptian pound against the dollar, as it The devaluation of the Egyptian pound was one of the main conditions for the International Monetary Fund to grant Egypt a loan of $3 billion.
Next year's scene
Analysts surveyed by Asharq Al-Awsat gather a foggy year that tends to continue the miserable scene of national currencies, as Al-Sanad expects that the year 2023 will witness a continuation of the depreciation of the exchange value of some currencies, but it will be less severe.
He attributed this to taking some reform measures by governments, reducing the severity of the global food crisis, as well as the global trend to develop policies and legislation for digital and encrypted currencies, which may reduce the importance of the US dollar and the impact of it. interest rates and the exchange rate against it.
- Half of the value
The region's currencies have significantly decreased in value, as the Egyptian pound has lost against the US dollar since the beginning of the year by 58 percent, and by a similar rate, the Turkish lira fell against the dollar. By 41 percent, the Iraqi dinar also recorded a decline against the dollar with a high fluctuation rate of 14 percent, while the exchange rate of the Iranian Riyal witnessed severe swelling at the end of this year, with it declining greatly before returning to stability with a slight loss of 0.61 percent, and the Sudanese pound recorded during 2022, it decreased against the dollar by more than 30 percent, while the Lebanese pound was blown by the winds of price decline due to the black market, which plunged in value by less than a third of the official price.
Speculation and smuggling
In addition to the fragility of the economies in the region, the escalation of global interest rates is accompanied by local factors that put pressure on the price of national currencies, as the factor of speculation as well as the smuggling of hard currency appears in the scene of the turbulence of national currencies in the region.
And the Central Bank of Lebanon continued to raise the exchange rate of the exchange platform against the US dollar, to reach last week to 38 thousand Lebanese pounds per dollar, from 31.2 thousand pounds, justifying this by controlling the exchange rate of the dollar in the parallel market, which rose during the holidays due to speculation and smuggling operations. The dollar is off limits.The Governor of the Banque du Liban, Riad Salameh, confirmed, in a statement, that the depreciation of the Lebanese pound in the parallel market during the festive period is due to speculation and the smuggling of dollars outside the country.
He pointed out that this rise caused inflation in the markets, which harmed the Lebanese citizen, since prices in Lebanon are linked to the exchange rate of the dollar. Limits in numbers that they apply to all Lebanese banks to pass these operations. This is until further notice.
In the past days, the exchange rate of the dollar in the parallel market (the black market) exceeded 47,000 pounds per dollar, and it declined again later quickly, reaching the limits of 43,000 pounds.
- International procedures
On the other hand, some international measures and the political factor in some countries in the region have contributed to disturbing the behavior of national currencies, as the currency markets in Iraq have witnessed, since the beginning of the year, a disturbing, fluctuating decline in the value of the local dinar, especially after the new measures imposed by the US Federal Bank on its Iraqi counterpart. Control conditions, at the beginning of this month, which prevented money transfers and sales of dollars in favor of banks and companies accused of money laundering for the benefit of armed parties.
The prevention of these banks from dealing in US dollars caused a scarcity of hard currency supply in the market, so that its exchange rate jumped to more than 158 thousand dinars, amid expectations that it would reach the barrier of 160 thousand soon. To reduce the amount of dollars from 250 million to about 50 million per day, in just one month.
And Iraqi sources indicated that Iraqi banks were unable during the past two weeks to adapt to the American conditions for buying dollars related to money laundering and reliable financial assets.
Violent fluctuations
In the scene of strict regulatory conditions, the Iranian rial continues to record an abnormal state of turmoil with violent fluctuations against the US dollar, especially in the last month of the year, breaking records with the imposition of new sanctions on Tehran following the suppression of popular protests that erupted more than a year ago. 3 months.
And the Iranian currency crisis toppled the governor of the central bank, as Iran finally appointed Muhammad Reza Farzin as the new governor of the central bank, instead of Ali Saleh Abadi, who appeared before Parliament, and partly blamed anti-government protests for the currency's Drop to record levels, and he also talked about high prices. Interest in more than 90 countries around the world.
In May 2018, the currency was trading at about 65,000 riyals to the dollar, ahead of the United States' withdrawal from the Iranian nuclear deal with world powers and the re-imposition of sanctions on Iran. The dollar was at 250,000 riyals when Ibrahim Raisi took office in August last year.
The price of the Iranian currency witnessed a fluctuating path throughout the negotiations aimed at reviving the nuclear agreement, which began in Vienna in April 2021 before faltering last March. After negotiations faltered until the outbreak of protests in Iran, the Iranian currency lost 40 percent of its value, as it traded at 360,000 riyals at the beginning of the protest movement on September 17.
Despite the Iranian currency's return to cohesion, the riyal has lost nearly two-thirds of its value against the dollar since the nuclear negotiations faltered, according to Radio Farda, which is funded by the US State Department, before the central interventions and pushing its price towards stability at the end of the year, losing only 0.61 percent of its value. .
Experts expect the Iranian currency to decline with the continuation of the unrest and the country's increasing isolation, amid Western criticism of the crackdown launched by the Iranian authorities against the protesters and its relations with Russia.
These relations include the drones that Iran reportedly sold to Russia and used in the war in Ukraine.
- public and private
In explanations of the current situation, economic analyst Abdulaziz Al-Sanad said that the depreciation of the exchange value of some currencies is due to two types of reasons: public and private factors, indicating that the general causes are not directly responsible for which governments are responsible, while the special reasons are up to each country accordingly. separately, and the central banks and governments of those countries are fully and directly responsible for them.
Al-Sanad added that the general causes are the high rates of inflation globally, and the increasing raising of interest rates by the Federal Central Bank in the United States of America, pointing out that the abuse of governments and the taking of precautionary and preventive measures Measures fall on the shoulders of governments and countries to mitigate any negative impact that may occur on the value of money. currency and its purchasing power.
Economics and debt
For his part, financial analyst Hamad Al-Olayan explained that national currencies are generally considered the main interface for any economy, and they give a general perception of the shape of the economy from the inside, pointing out that the reasons for the decline of national Currencies in recent times are similar in their factors among most countries of the world except for the euro region.
Olayan stressed that the reasons for the depreciation of the currencies of the Arab countries and Turkey against the dollar are due to the accumulation of debts and the depletion of reserves of foreign currency "dollars", as well as the economic consequences of the Corona pandemic.
He said that the pandemic led to a deficit in the budgets of a number of those countries, in addition to the rise in product prices in a way that caused currencies to lose their purchasing value in an unprecedented way.
Interest and inflation
Olayan stressed that high inflation, high interest rates and political tensions in Europe played an important role in putting pressure on currencies not supported by industries or petroleum products.
Al-Olayan believes that the current data indicates that it is difficult for these currencies to return to their previous levels at the beginning of the year, and that it may take many years, until the economic stability of these countries returns and the pressure on major foreign countries returns. currencies, the most important of which is the "euro", eases.
Weakness of the economy
Al-Sanad returns, regarding the special reasons for the decline of the national currency, such as a state of disturbance in the value of the Lebanese pound, to the failure to manage financial and monetary policies appropriately, procedurally and temporally, indicating that since the beginning with the emergence of weakness in the Lebanese economy and the decrease in cash flows from abroad, the accumulation of debt, the depletion of hard currencies, the expansion of unregulated parallel markets, and the increase in smuggling through illegal outlets, accompanied by the absence of a comprehensive financial reform programme, and weakness in debt restructuring.
Al-Sanad indicated that the Lebanese pound has lost more than 90 percent of its value since the start of the economic crisis in 2019.
With regard to the Egyptian pound, Al-Sanad indicated that the overall inflation rate in Egypt reached 20 percent, especially in food and real estate, pointing out that the Egyptian Bank's decision to implement a flexible exchange rate system for the pound against foreign currencies led to the decline of the Egyptian pound against the dollar, as it The devaluation of the Egyptian pound was one of the main conditions for the International Monetary Fund to grant Egypt a loan of $3 billion.
Next year's scene
Analysts surveyed by Asharq Al-Awsat gather a foggy year that tends to continue the miserable scene of national currencies, as Al-Sanad expects that the year 2023 will witness a continuation of the depreciation of the exchange value of some currencies, but it will be less severe.
He attributed this to taking some reform measures by governments, reducing the severity of the global food crisis, as well as the global trend to develop policies and legislation for digital and encrypted currencies, which may reduce the importance of the US dollar and the impact of it. interest rates and the exchange rate against it.
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