A war of attrition for foreign exchange in Iraq: speculation behind the scarcity of the dollar

Two months ago, after the US Federal Bank imposed restrictions and set precise requirements in front of [You must be registered and logged in to see this link.] sales outlets in the foreign currency auction at the [You must be registered and logged in to see this link.] to control its smuggling operations to neighboring countries, the exchange rate rose from 1460 dinars to one dollar, to approximately 1600 dinars, and sometimes increased. Amid fears of new leaps, in light of the government's inability to force it to back down.
Since then, the Central Bank says that the rise is temporary, and the price will return to be within the limits of the official exchange rate in the currency auction of 1460 dinars, setting a time limit that ends at the end of January to achieve this goal, according to what was stated by the Central Bank’s advisor, Ihsan Al-Yasiri, to the Iraqi News Agency. formal (conscious).

He added, "The US Federal Bank has set strict conditions that oblige us to display lists in the dollars sold, including the names of the persons and beneficiaries, and it takes 15 days to state the bank's position on the soundness of the purchase process for the party submitting the request, and the sale process stops in the event that the Federal Bank objects to a specific name, because it is required." Or he found a suspicion of the purpose of buying the dollar.
This measure reduced the funds sold in the Central Bank, which caused a shortage of dollars in the local market, which prompted an unprecedented rise in its price.
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Concurrently, the Central Bank initiated several measures supported by the government to cover the demand for the dollar and ensure its availability without a scarcity that increases its price, by opening windows to sell it in government and private banks up to 10 thousand dollars per request, but on the condition that it is for the purposes of travel, study abroad, or treatment, but these Solutions appear to be insufficient.

Addressing the US Federal Reserve
, a government source, who asked not to be named, says, “The step is to sell the dollar through governmental and private banks in order to meet the demand for it by travelers and those wishing to receive treatment or study abroad, at no less than 10 thousand dollars for each request, and specifying an amount of two thousand dollars.” A dollar for every citizen who needs a dollar, which helped prevent larger jumps in its price, and the problem currently is not the lack of sufficient supply, but rather the speculations that some people make for the purpose of creating a state of artificial scarcity in the market.
The source denied, in an interview with Al-Araby Al-Jadeed, what is currently being circulated, that the government is in the process of reducing the exchange rate of the dinar against the dollar again.
Information is being circulated indicating that the government is in the process of adopting an exchange rate in the 2023 budget that is currently being prepared, ranging between 1300-1350 dinars per dollar to ensure a rapid decline in its price, which was denied by the government source, indicating that such a scenario is not true, and it was circulated in the market. For the purpose of maneuvering between speculators.
He continues, saying, "The government is studying solutions, including expanding outlets for selling dollars to citizens in all governorates, and not confining them to Baghdad, which suffers from great pressure on dollar demand, and obliging exchange offices to sell through a price that guarantees a reasonable profit margin of no more than 500-1000 dinars per dollar." A maximum of $100, compared to the official price, provided that strict legal penalties are imposed against those who violate this, and the issue is under study, and no decision has been taken on it yet.
And he continued: “The central bank is in compliance with the instructions of the US Federal Bank that prevent the dollar deposited in the bank from going to countries where the dollar is prohibited from entering, and sent official letters to the US Treasury and the Federal Bank calling on them to temporarily lift or reduce these measures to ensure that they do not affect the Iraqi economy and create a state of stability in the exchange rate.” Before sending the 2023 draft budget, which the government is currently discussing, to parliament.

Dollar smuggling outside the banking system
Economist Nabil Al-Ali said in his interview with Al-Araby Al-Jadeed that “the rise in the price of the dollar came after the imposition of external measures aimed first at protecting Iraqi money on the one hand and protecting the international financial system on the other hand by the US Federal Bank, which requires foreign transfers to acquire international standards, It was better for the official institutions to prepare for that, especially since there are many American warnings that it is not possible to remain silent about the smuggling of the dollar in order to avoid any repercussions affecting the price of the dollar against the dinar.
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He added, "The imposition of restrictions by the US Federal Reserve on requests to buy dollars from the currency auction in the Central Bank of Iraq caused a decrease in the bank's sales of foreign currency, which made those wishing to buy larger quantities go to the local market to make up for the shortage, and thus increased the demand for the US currency, especially from those They manage smuggling operations abroad, and the imposition of restrictions requires additional conditions that do not correspond to the interests of many merchants, so they went to the market to buy the dollar, which caused a jump in its price.
And he continued, "The Central Bank of Iraq covers requests that meet the criteria, and this matter made the dollar bought from it insufficient, and the less the bank sells, the higher its price in the market, because there is an increasing demand, and in return there are illegal smuggling operations through transfers outside the banking system, and it is not possible control because of the internal chaos in the country.
In response to a question about the possibility of imposing US sanctions on Iraq as a result of the continued smuggling of dollars to neighboring countries, Al-Ali said, "It is not possible to say for sure, because any additional sanctions or restrictions will harm Iraq a lot, but what we expect is that the US Federal Reserve may allow facilities, in a realistic measure." It prevents further repercussions, especially since the relationship between Baghdad and Washington is governed by a strategic agreement that supports Baghdad's economy.

Threatening to vote to dismiss the central governor
, Moein Al-Kazemi, a member of the Parliamentary Finance Committee, told Al-Araby Al-Jadeed that “there are other reasons for the dollar crisis, including the presence of speculators in exchange offices who invested in the increased demand by reducing supply, which raised the price of the dollar, On the other hand, the government dealt with the issue with an action plan to stop the escalation through several steps, but we see it as insufficient to stop the continuous escalation.
Regarding the proposals of the Finance Committee to remedy the situation, Al-Kazemi said, “One of the duties of the Central Bank is to draw up the monetary policy of the state, but its entry into the executive side kept it from performing its role as it should, and therefore an additional interface must be found to remedy the situation, such as the mechanism for introducing the Iraqi Trade Bank in the task of selling dollars to merchants.” Those wishing to buy it to finance foreign imports with the application of official standards to ensure more dollars are available to those who demand it and reduce pressure on the Central Bank.
He added, "Selling the dollar by the Central Bank to those wishing to buy it for the purpose of travel and treatment does not benefit the country, because the dollar will go abroad and will not enter the monetary mass in the Iraqi market, which means continued scarcity and escalating demand continuously."

A member of the Parliamentary Finance Committee, Mueen Al-Kazemi, said, in his interview with Al-Araby Al-Jadeed, that "there are other reasons for the dollar crisis, including the presence of speculators in exchange offices."

He stressed that "the Finance Committee wishes to host the governor of the Central Bank in the Iraqi parliament to provide clarifications and practical solutions, and if it is proven that he is incapacitated, we see that it is necessary to vote on his dismissal for failing in his mission," noting that "the committee also believes that going to reduce the price of the dollar in the budget Less than 1,400 dinars from the price specified in it is not a practical solution to control the exchange rate, and therefore practical steps must be taken to provide the dollar in the local market, which caused the scarcity of supply to increase its prices.

Hand over the names of smugglers
Political activist Hussein Al-Shalah confirms in an interview with Al-Araby Al-Jadeed that “opening outlets for selling dollars in banks will not succeed in curbing the continuous rise in the value of the dollar against the dinar, because the supply is scarce, and whoever deliberately issues such a decision aims to invest the price difference between 1460, which is The sale through those banks, and the real market price, which reached 1,600 dinars, and definitely there are influential beneficiaries who took advantage of the high price to buy dollars and sell them at this difference.
He pointed out that "easing the restrictions of the Federal Bank on the movement of the dollar requires the government of Prime Minister Muhammad Shia'a al-Sudani to name the persons and entities involved in the smuggling of dollars to neighboring countries and hand them over to the Federal Reserve to punish them," referring to the sanctions imposed by Washington on Tehran.
He added, "Merchants, owners of exchange offices, owners of private banks, and people connected to the parties have always benefited, as they have always been interfaces to buy dollars through the currency auction, by submitting purchase requests from those outlets, and with them cooperating to ensure obtaining more than the permitted amounts of more than 10 thousand dollars, and this is a door." From the gates of corruption, he invested the meager sale in the foreign currency auction. He continued by saying, "Those who circumvent US sanctions are the ones who bear the responsibility, and it should not be blamed on the Iraqi people."
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