What is the secret of the decline of the Iraqi dinar despite the increase in dollar reserves?

The exchange rate of the Iraqi dinar has been witnessing fluctuations against the dollar for about two months, despite the large jump in foreign exchange reserves, which is currently close to $100 billion, thanks to the rise in oil prices

. difficult, while parties in the country hold Washington responsible for this decline

. While the official fixed exchange rate is 1470 dinars against one dollar, the price of the dinar in the market has declined since mid-November to 1600 dinars at the beginning of the week, before settling at about 1570, according to the official news agency, i.e. The Iraqi currency has lost about 10 percent of its value

, and this decline is not considered huge, but it has begun to cause Iraqis to worry about the high prices of imported materials, such as gas and wheat, for example.

Adviser to the Prime Minister for Financial Affairs Mazhar Salih says, in a report to Agence France-Presse, that "the fundamental and fundamental reason" for this decline "is an external constraint,"

but some Iraqi politicians consider that the United States is behind this fluctuation

. Contrary to rumors and misinformation, there is no evidence of American pressure on Iraq.” The important economic and commercial partner of neighboring Iran,

in fact, the fluctuation of the dinar is linked to the start of Iraq’s compliance with some standards of the international transfer system (Swift), which Iraqi banks must apply since mid-November to access To Iraq's reserves of dollars in the United States

In order for Iraq to be able to access those reserves, which amount to $100 billion, it must now comply with systems that “require compliance with the provisions of global anti-money laundering, provisions for combating the financing of terrorism, and those related to sanctions, such as those applied to Iran and Russia,” according to Tabakishli,

adding that the matter is related to entering Iraq is “within a global financial transfer system that requires a high degree of transparency,” but that “caused a shock” to many Iraqi banks “because they are not used to this system.”

Mazhar Salih explained that Iraqi banks should now register their “transfers (in dollars) on an electronic platform.” The requests are scrutinized...the US Federal Reserve checks them and if they have doubts they stop the transfer."

Since the implementation of the restrictions began, the Federal Reserve has refused "80 percent of requests" for remittances to Iraqi banks, according to Salih, due to doubts about the final destination of those amounts being transferred. He said

this refusal affected the dollar supply in the Iraqi market. On the other hand, the demand accumulated, but the supply was not consistent with it, and thus the exchange rate declined with the decline in bank transfers in dollars

.

In the meantime, the Iraqi authorities have taken measures, including facilitating the financing of private sector trade in dollars through Iraqi banks, and opening outlets for selling foreign currency in government banks to the public for travel purposes.

The Council of Ministers also decided to "commit all government agencies to sell all goods and services inside Iraq in dinars and at the rate of the Central Bank, which amounts to (1470) dinars for one dollar.

" Despite the

dinar's decline, the inflation rate is still small, reaching 5.3 at an annual rate in October 2022, according to the Ministry of Planning. However, actual concerns are related to the purchasing power of the population.