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Optimism about ending the gap between the "official" and "parallel" prices of the dollar
Iraq 2023/02/12
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Baghdad: Hoda Al-Azzawi
Experts in finance and economics have expressed optimism that the Central Bank of Iraq’s agreement with a major American financial institution to pay the banking system payments to China will contribute to bridging the wide gap between the “official” and “parallel” prices of the dollar, and the experts explained that the difference between the two prices is due to multiple reasons not related to the decision. government, but rather the temporary change that affected the mechanism of remittances for the purpose of import, and that it is possible, with serious and strong measures, to restore the stability of the exchange rate.
And the advisor to the Prime Minister for Financial Affairs, Dr. Mazhar Muhammad Salih, said in an interview with “Al-Sabah” that “the function of the monetary policy of the central bank is to impose stability, so when exchange rates began to approach (two decimal places) due to expectations of current inflation, monetary policy entered With its reserves to raise the value of the Iraqi dinar ».
He pointed out that «the reason for the difference in the official exchange rate from the parallel rate is not economic, but because of an international administrative regulation caused by transfers that constitute about 90% of the demand for currency, and these transfers are subject to compliance rules imposed by the US Treasury and the Federal Bank».
He emphasized that «all these are temporary problems, and that with the regularity of Iraq's foreign trade and its subjection to compliance, transparency and governance controls, as was the case in Washington in terms of agreements and packages, over time the exchange rates will stabilize».
Salih pointed out that "the announcement by the Central Bank of Iraq that trade between Iraq and China, which exceeds 53 billion dollars annually, will take place directly with China through the mediation of an American bank, which will work to bring the official price of the dollar closer to the parallel price by 50 percent."
Yesterday, Saturday, the Central Bank of Iraq announced the agreement with the American “JP Morgan” bank to facilitate payments from the Iraqi banking system to China to finance imports.
And the Central Bank stated in a statement issued yesterday, Saturday, that its governor, Ali Mohsen Ismail, met with Daniel Zeliko, Vice Chairman of the Board of Directors of the “JP Morgan” institution, on the sidelines of his visit to Washington, and during the meeting it was agreed that the “JP Morgan” bank would facilitate payments from The Iraqi banking system to the People's Republic of China to directly finance private sector imports.
The Chinese embassy in Iraq had announced, yesterday, Friday, that the volume of trade exchange between the two countries exceeded 53 billion US dollars during the past year.
In addition, the expert on economic affairs, Dr. Nabil Al-Marsoumi, said in an interview with Al-Sabah: “The gap between the official exchange rate and the parallel rate is expected, because the problem today is in bank transfers and restricting imports, so when bank transfers decrease by the range of 85-90 % of foreign trade financing is the trend towards (the cash dollar) for which the demand has increased, so that we have two “parallel” prices that take place between merchants at home, and the official exchange rate regulated and determined administratively by the Central Bank of Iraq.
And the expert warned that “if the gap between the two prices is not closed, then the coming days will witness a rise in commodity prices, and the problem will increase if it is not resolved radically,” noting that “the problem is in the cash dollar that has always existed, because there are dollar smuggling operations in order to carry out commercial transfers.” Black, especially since many merchants are unable to deal with the electronic platform.
Al-Marsoumi noted that “if the electronic platform stops dealing with transfers between Iraqi and Iranian merchants that were made through banks in the UAE to pay import bills, these merchants will resort to cash dollars to pay their dues.” He stressed that “this issue is complex, thorny, difficult, and in need of Radical treatments, and without that, the gap will remain large and commodity prices will rise.”
In addition, a member of the Parliamentary Economy, Industry and Trade Committee, Soran Omar, said in an interview with “Al-Sabah”: “The problem of the dollar price is related to the control of the market and the continuous smuggling of this currency, and money laundering is taking place.” He called for a serious and real review of the decision to grant the dollar to banks. And the exchange companies participating in the currency auction, usually those
It is the "main problem".
Omar pointed out, "The difference between the price of the dollar from the central bank and the market benefits dollar dealers, so new measures must be taken to auction the currency," accusing banking companies, banks, and merchants linked to politicians of smuggling large quantities of dollars through the Kurdistan region and from it to Turkey and outside Iraq, calling for tightening Censorship
and accounting in this file.
Financial expert Obaid Mahal criticized, in an interview with Al-Sabah, the weakness of the regulatory and governmental procedures regarding dollar smuggling and the price difference between the official and the black market, asking: “Government agencies call on the citizen to report who sells the dollar at a price higher than the official price (132 thousand dinars for every 100 dollars). However, those same entities publish the well-known stock exchange prices, which exceed 158,000 dinars! So the matter of striking the official price against the wall is not a secret, and that is the responsibility of the state, not the citizen.
Yesterday, Friday, the Federal Intelligence and Investigation Agency issued a statement calling on citizens to “exercise caution and report currency smuggling gangs, speculators, exchange rate manipulators, unofficial transfers, and money exchange shop owners who are not committed to the official rate, via the free hotline (144),” and he added. The statement, that “do not deal except with the official dollar exchange rate, which was set by the Central Bank and approved by the Council of Ministers.”
Edited by: Muhammad Al-Ansari
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