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- SATURDAY, 01-21-2023, PM 1:01
- KARRAR AL-ASADI
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The least that can be described as an economic catastrophe threatens liquidity and casts a shadow over the country of black gold. This is how the financial scene in Iraq may look, amid the dwindling of the near solutions, “The dollar or the dinar?” .. This time, both are in the boat of no return.
The British "Middle East Eye" website highlighted the deep gap in Iraqi money, after the US crackdown on corruption and dollar smuggling, through the global money machine "the Federal Reserve" or as the Iraqis have come to know it well, the "Federal Bank".
The dinar is disappearing
The currency auction crisis, new and old at the same time, but it is heading towards complexity in the coming days, especially after the tax secretariat scandal known as the “theft of the century”, the average month of October 2022, which consists of the theft of 2.5 billion dollars, or a little more, which resulted in Imposing strict restrictions and unprecedented US tracking since 2003, to weigh on the Iraqi people and cause the collapse of daily trade in dollars through the currency auction run by the Central Bank of Iraq.
The government is now facing a shortage of dinars, which has left it struggling to pay public sector salaries and meet its other monthly obligations, a senior official at the Central Bank of Iraq, speaking on condition of anonymity, told Middle East Eye, stressing that “The problem Iraq faces is Dinars are scarce, not dollars.”
The Iraqi government needs at least eight trillion dinars (about $5.5 billion) per month to pay the salaries of government employees, retirees, social welfare beneficiaries, victims of terrorism, and others, and this is largely guaranteed through the currency auction.
Most of this liquidity comes from Iraqi oil revenues, which have been paid since 2003 in dollars into an account maintained by the Federal Reserve Bank of New York.
The US Treasury transfers $10 billion annually to the Central Bank of Iraq from oil sales revenues, in order to boost its balance in foreign currency.
This amount is also delivered in cash in four installments. Officials said all dollars are new and have serial numbers on file with the Federal Reserve for easy tracking.
Then the Central Bank of Iraq sells dollars through a foreign currency auction and other channels to obtain dinars for the Ministry of Finance.
Now the drop in dollar sales has caused a shortage of dinars for Iraq's central bank, and even at its peak the auction usually didn't raise enough to meet the $275m the government needs each day.
This shortage of currency shares held by the central bank is usually covered by internal loans between the bank and the government, by printing more currencies, or by other financial activities.
The Iraqi parliament has not yet approved the federal budget for 2023, but the amounts allocated for salaries and compensation in the proposed budget, which must be paid in local currency, amount to about 100 trillion dinars ($68 billion) during the current year.
And the British website quoted a senior official in the Central Bank of Iraq as saying, "The bank currently owns about 83 trillion dinars (56 billion dollars) only, so there is a need for quick solutions."
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