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- TUESDAY, SEPTEMBER 12, 2023, PM 4:53
- KARAR AL-ASSADI
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Central Bank sales at auction on Tuesday amounted to more than $200 million, while the dollar continues to crush the Iraqi dinar in local markets.
Today, during its auction for buying and selling the US dollar, the Central Bank sold 201 million, 395 thousand and 261 dollars, which the bank covered at a base exchange rate of 1,305 dinars per dollar for documentary credits and international settlements for electronic cards, at a price of 1,310 dinars per dollar for external transfers, and at a price of 1,310 dinars per dollar in cash. (131,000 dinars per 100 dollars).
Most of the dollar sales went to strengthen balances abroad in the form of (remittances, credits), amounting to 137 million 225 thousand and 261 dollars, while cash sales amounted to 64 million and 100 thousand dollars.
The number of banks that purchased cash dollars reached 10 banks, while the number of banks that responded to requests to enhance balances abroad reached 17 banks, while the total number of exchange and brokerage companies participating in the auction was 145 companies.
The dollar crushes the dinar
The exchange rates of the US dollar against the Iraqi dinar rose today in the markets of Baghdad and the rest of the provinces.
Prices in the main Kifah and Harithiya stock exchanges in Baghdad recorded 155,500 dinars for 100 dollars, while selling prices in exchange shops in local markets in Baghdad reached 156,500 dinars for every 100 dollars, while purchase prices reached 154,500 dinars for every 100 dollars.
Citizen and government
The government has repeatedly confirmed, through Iraqi Prime Minister Muhammad Shiaa Al-Sudani, that the exchange rate will decline immediately after the approval of the country's general budget, which was also confirmed by many government officials over the past months, but that has not happened yet. While the rise in the exchange rate of the dollar against the Iraqi dinar raised concerns among official and popular circles in Iraq, after the US Federal Bank set strict regulatory conditions requiring the currency selling window to display lists of dollars sold that include the names of the people and beneficiaries to indicate the Federal Bank’s position on the safety of the purchasing process for the party presented. The request is not linked to entities subject to international embargoes or sanctions by the US Federal Reserve.
Representative Raed Al-Maliki says, “The solutions proposed by the government regarding exchange rates did not contribute to addressing the root of the problem, and it was expected that the government’s determination of the exchange rate was what determined the price, and what happened in the budget was the approval of the price, but in the market the price was different and a gap occurred.” .
Al-Maliki points out that "the real cause of the problem, which will solve the exchange rate crisis, is related to trade, as a large part of Iraqi trade and imports are not covered by dollars, and the reason for this is that they occur unofficially, through unofficial outlets, and countries that refuse to deal with the United States of America."
He asserts, "The continued lack of state control over trade and the continuation of informal trade, which takes place without knowledge and passes through official ports, has deprived Iraq of many revenues related to the economic situation."
Currency Bank
A Western website specialized in Iraqi economic affairs stated that what is happening in Iraq is the “largest difference” between market prices and the official “window” price of the Central Bank of Iraq. He also urged the Central Bank to activate the steps of selling foreign currency at official prices to citizens through purchases with electronic cards, opening sales outlets for travelers or patients outside Iraq, or financing foreign trade, in accordance with fundamentalist contexts and international standards for opening documentary credits and remittances.
The Finance Committee hosted the Governor of the Central Bank, Ali Al-Alaq, on July 24, 2023, to discuss the banking sector, the high exchange rates of the dinar against the dollar, and the reasons for the sanctions imposed on a number of Iraqi banks.
The relationship between “there is optimism in the process of reforming the economic reality and money management, and the process of controlling the exchange rate,” adding: “We hope to achieve economic stability and improve performance,” pointing out that there is a problem related to the presence of sanctions imposed on some banks, which leads to challenges that must be faced. There is a need to find sufficient measures to control the labor market and the exchange rate.
Specialists have confirmed that opening outlets to sell the dollar on a monthly basis to every citizen does not have any positives. Rather, this matter will lead to an increase in currency smuggling operations and an increase in black transfers, and this matter will raise the dollar more in the market, as the citizen will sell the dollar to speculators, with the aim of making black transfers, and for this reason There is no such government approach.
From time to time, “proposals and demands” come out to sell the dollar directly to all citizens, to eliminate the dollar crisis and its rise in the parallel market, which is rejected by experts.
smuggling
The government took a decision last February to raise the value of the Iraqi dinar against the dollar after its price reached 1,470 dinars per dollar at the end of 2020. It was implemented by the previous government to fill the deficit in expenses and salaries due to the decline in oil prices in global markets. While the Ministry of Interior prevented merchants and citizens from dealing in dollars in markets and shops, and limited transactions to the Iraqi dinar.
Economic specialists point out that the market requires many measures to maintain currency stability, most notably preventing smuggling.
It seems that the economic and security solutions to the rise in the price of the dollar in the parallel market inside Iraq did not achieve any significant results, but rather complicated the scene and led, in part, to an increase in prices in the Iraqi markets.
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