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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    British report: Iraq is facing an acute shortage of dinars and is struggling to pay salaries

    Rocky
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    salaries - British report: Iraq is facing an acute shortage of dinars and is struggling to pay salaries Empty British report: Iraq is facing an acute shortage of dinars and is struggling to pay salaries

    Post by Rocky Sat 21 Jan 2023, 11:26 am

    British report: Iraq is facing an acute shortage of dinars and is struggling to pay salaries

    [ltr]2023.[/ltr]

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    Baghdad - people   
    Iraqi officials told Middle East Eye in Britain that Iraq is facing a deep gap in its public finances due to the crackdown on corruption and dollar smuggling by the US Federal Reserve since the seizure of tax secretariat funds known as the "theft of the century".  
      
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    Following is the text of the report:  
      
    The crisis, which is expected to worsen in the next few weeks, was caused by the collapse of daily trade in dollars through a currency auction run by the Central Bank of Iraq.  
      
    The Iraqi government relies on the auction to convert the dollars it earns from oil revenues into Iraqi dinars. Last year, an average of about $200 million per day was sold through auctions to banks and private companies.  
      
    But that number fell sharply in the last two months of the year, dropping to a daily average of $56 million by late December, according to published data.  
      
    The government is now facing a dinar shortage, which has left it struggling to pay public sector salaries and meet its other monthly obligations.  
      
    "The problem we are facing now in Iraq is the scarcity of Iraqi dinars, not dollars," said a senior official at the Central Bank of Iraq, who spoke on condition of anonymity.  
      
    Neighboring countries, which rely heavily on Iraq's official foreign exchange markets for dollars, are facing a liquidity crisis as Iran, Turkey and Syria are affected, according to officials in Baghdad.  
      
    The crisis has affected the broader economy, as the exchange rate of the dollar in informal markets has increased from 148 dinars to 163 dinars since late November.  
      
    The Iraqi officials the site spoke to denied any direct connection between the current crisis and what is known as the “theft of the century,” in which about $2.5 billion was stolen from the Iraqi Tax Authority through a state-owned bank between September 2021 and August 2022. .  
      
    But they acknowledged that the US Federal Reserve imposed tighter controls on private banks buying dollars through auction two months ago, just weeks after Iraq's Finance Ministry disclosed details of the theft on Oct. 10.  
      
    Iraqi Prime Minister Mohammed Shia al-Sudani said in October that most of the stolen money was believed to have been smuggled out of Iraq.  
      
    In November, Judge Haider Hanoon, head of the Federal Integrity Commission (FCI), Iraq's anti-corruption watchdog, said Iraq had asked for help from friendly governments, international organizations and the United Nations to recover the stolen funds.  
      
    One of my advisors to Al-Sudani, who spoke to the English website on the condition of anonymity, said that the Federal Reserve began examining foreign money transfers in November in an effort to track stolen funds.  
      
    The consultant said this caused delays in the release of remittances and led to lower dollar sales through auction.  
      
    The chancellor said the Fed also provided source checks for funds held by private banks participating in the auction, prompting many of them to pull out and raise the unofficial exchange rate.  
      
    Crisis meeting  
    In late December, the Coordination Framework, the largest political alliance supporting the government, held a meeting in Baghdad to discuss the high cost of the dollar and the crisis in Iraqi markets.  
      
      
    The meeting was confined to the senior leaders of the Sudanese coalition and the governor of the Central Bank, Mustafa Ghaleb.  
      
    Ghaleb told the meeting that the Federal Reserve has “dangerous indications” of dollar smuggling operations to neighboring countries, according to a leader who attended the meeting.  
      
    One of the attendees said that Ghaleb appointed two Egyptian banks based in Dubai, to whom most of the dollars bought in the auction were transferred during the period under investigation. Then the dollars were transferred to Amman in Jordan, and then to Iran.  
      
    The leader said that four private Iraqi banks that transferred the bulk of the funds to the two Egyptian banks received orders from the Central Bank of Iraq to stop dealing with them in November, based on a directive from the Federal Reserve Board.  
      
    According to a document seen by the British website, the central bank also ordered banks and other financial institutions to stop dealing in dollars with the four banks "for audit purposes" on November 6.  
      
    This was challenged in the lawsuits filed against the Central Bank by the four banks - Al-Ansari Islamic Bank for Investment and Finance, Al-Qasab Islamic Bank for Finance and Investment, Asia Iraq Islamic Bank for Investment and Finance, and the Iraqi Middle East Bank. Investment Bank.  
      
    But their cases were dismissed this week by the Financial Services Court, which asserted the Fed's right to block them from dealing in dollars.  
      
    A financial advisor involved in the “theft of the century” investigation said the incident had provided the Federal Reserve with “definitive evidence of theft of government funds taken with government tools.”  
      
    "They couldn't turn a blind eye to it," said the consultant. It provided the required incentive for the Federal Reserve to impose its procedures on private banks and the Central Bank of Iraq.  
      
    “They [Americans] have been looking for this opportunity since 2014 to pounce on foreign currency auction sales, but previous prime ministers always got exceptions under the pretext of buying electricity, fuel and other things from Iran.  
      
    But this time the story is different.  
      
    MEE has contacted the Federal Reserve for comment but did not receive a response at the time of publication.  
      
    revenue from oil sales  
    The Iraqi government needs at least eight trillion dinars (about $5.5 billion) per month to pay the salaries of government employees, retirees, welfare beneficiaries, victims of terrorism, and others, and this is largely secured through the currency auction.  
      
    Most of this comes from Iraqi oil revenues, which have been paid out 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 foreign currency balance.  
      
    This amount is to be delivered in cash in four instalments. Officials said all of the dollars are new and have serial numbers on file with the Federal Reserve to make them easier to track.  
      
    After that, the Central Bank of Iraq sells the dollar through a foreign currency auction and other channels to obtain a dinar for the benefit of the Ministry of Finance.  
      
    Now, the decline in dollar sales has caused a shortage of dinars for the Central Bank of Iraq. Even at its peak, the auction usually doesn't raise enough to meet the $275 million the government needs each day.  
      
    This shortfall is usually covered from stocks of currency held by the central bank, through internal loans between the bank and the government, by printing more currency, or through other financial activities.  
      
    Foreign currency auction data for the past four years reviewed by the site shows that the amount of dollars in circulation remained stable, averaging about $200 million per day during 2019 and 2020, despite the decline in oil prices, the Covid epidemic, and the recession.  
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