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The dinar continues to decline, and the high cost gnaws at the purchasing power of citizens
Economical 2023/01/23
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Baghdad: Haider Fleeh Al-Rubaie
Significantly, the volume of fears expressed by economists about the results and repercussions of the exchange rate crisis has expanded remarkably, which they confirmed could cause a doubling of poverty rates and “gnawing” a large part of the incomes of workers in the public and private sectors and reducing their purchasing power, in addition to reaching frightening rates of inflation. To affect the overall economic process, and while they stressed the need for the Central Bank to resort to using its monetary tools to “stabilize” the dinar price, they suggested the possibility for the government to intervene strongly in economic activity, and to undertake a percentage of imports to create price competition in the markets.
The measures taken by the monetary authority “so far” have not achieved its goal of reining in the dollar, whose exchange rate “at times” exceeded the barrier of 1,600 dinars per 100 dollars, a figure that economists described as “dangerous” and which could undermine sustainable development rates. And lead to severe economic damage due to the increase in the prices of all goods and services, and thus the rise in the inflation indicator.
In the midst of this, the Central Bank confirmed, earlier, that it would continue to work to simplify external transfer procedures through official channels and at the official exchange rate for merchants in light of the launch of the electronic platform for external transfer at the beginning of this year, while the bank’s advisor, Ihsan Shamran Al-Yasiri, told the Iraqi News Agency. (conscious): “The turmoil in dollar prices is a temporary situation, and the Central Bank’s resources are now at their highest levels in decades, and the state’s financial situation is very comfortable,” noting that “the controls that were put in place for selling dollars on the platform came in order for the dollar to go to the real beneficiary.” It is an organizational process.
Despite the packages of measures that the Central Bank can take to counter the rise in the dollar exchange rate, the academic and economist, Dr. Sattar Al-Bayati, believes that “the currency auction is not among those measures that can represent part of monetary policy, indicating that the tools of that policy are familiar to Specialists in economic affairs, which are four pillars represented in “the interest rate, the rediscount rate, the open market, and the legal reserve,” and there are other tools that may not be used, but the window for selling the currency is not among them, “according to the speaker.
Al-Bayati pointed out during his speech to “Al-Sabah” that “this window may have fulfilled its purpose in a certain period by financing imports, but over time it has become a burden on the economy, and this burden is translated through the many forgeries witnessed in the certificates of origin of imported goods, Therefore, the window for selling the currency has become a real drain on Iraqi financial resources, especially hard currency.
Al-Bayati believes that “fixing the exchange rate represents a big mistake, as most types of exchange rates are flexible, floating or managed exchange rates, and the main goal is the stability of the exchange rate, and that one of the most important tasks of the central bank is to work to stabilize the exchange rate of the Iraqi dinar.” , and not stabilizing it,” explaining that the exchange rates remaining high has serious negative consequences represented in the high rates of inflation and the erosion of the real wages of the citizen. To not obtaining his requirements from the market, in which prices began to rise remarkably, stressing that if the situation continues as it is, the number of those below the poverty line will increase.
Regarding solutions that could lead to mitigating the sharpness of the dollar’s rise, the expert Al-Bayati pointed out that there are a number of measures that lead to that purpose, including “the possibility for the government to intervene strongly in economic activity, and to undertake a percentage of imports to create a kind of competition that will reflect positively on prices and the citizen.” And not to leave that matter entirely to the private sector,” stressing the need for “the government to intervene to restore matters to their true position regarding the exchange rate and return it to what it was previously, and for the Ministry of Finance not to argue that there is a budget deficit, as Iraq has large resources, and the reserves have reached good numbers.” Very much, and we must not forget that "the country's budgets always start with a deficit and end with a surplus."
In turn, the banking expert, Abd al-Rahman al-Sheikhly, explained that the first reason behind the high exchange rate is “the negligence in applying the AML due diligence standards for preventing money leakage, and the international decisions that led to stopping the participation of many banks in the currency auction.” ".
Al-Sheikhly suggested, during his interview with Al-Sabah, a number of solutions that could address the crisis of the high exchange rate, including “compliance with international standards, especially with regard to foreign transfers, as well as adherence to documentary credits in transfers and according to the Central Bank’s instructions, auditing all transactions, and requiring knowledge of the sources of funds that participate.” In which the customer is in the currency sale window and who is its real owner, what are the beneficiaries from it, the size and type of imported goods, and that taxes and customs are collected on it in accordance with the applicable laws.
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