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Replacing the dinar with the dollar
Economical 10/09/2023
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Muhammad Sharif Abu Maysam
Finally, the Central Bank of Iraq announced in a statement last week that “the coming year will witness the restriction of all internal commercial and other transactions to the Iraqi dinar instead of the dollar, except for those delivered to travelers.”
Financing foreign trade will be directly for merchants dealing in remittances outside the electronic platform, through licensed banks that will deal with correspondent banks in foreign transfer operations and in the local currency of the country from which the merchant wants to import. Then the dollar auction will be gradually dispensed with and the central bank will intervene to control the exchange rate through a shift in its tools. Cash, which will be more effective in achieving monetary stability, due to the expected decline of the so-called black market and the emergence of a real parallel market that will effectively contribute to financing the total demand for foreign currencies after the local currencies of the trading countries are traded within the parallel market following the opening of transfer channels for those currencies in a way Official. Thus, we will witness a new phase in which exchange rates will be more stable than the phases witnessed in previous years if dollar smuggling operations are controlled, which is expected to decline automatically with the decline of the dollar supply on the black market.
At that time, the country will witness the real beginning of an attractive investment environment, as the confusion in the dollar exchange rate was often an element that repelled investors due to their inability to delve into the area of expectations in which the exchange rate was fluctuating, which makes financial feasibility studies more difficult in calculating construction and operating costs and recovery periods. Total costs and profit calculations. This is in addition to other repulsive factors, which were the confusion of the security situation, the incompleteness of legislation related to the investment environment and the regulation of market relations, the failure to activate the package of economic laws that had been legislated, and the spread of corruption and bureaucracy.
However, there is a problem linking the exchange rate and the costs of production in neighboring countries compared to the costs of production inside Iraq. The lower the exchange rates of neighboring countries’ currencies are against other currencies, such as in Turkey, Iran, and Syria, compared to the exchange rate of the Iraqi dinar, the lower the cost of producing goods in those countries. The cost of production is comparable to that in Iraq, which makes the investment environment unattractive at the level of production of traditional goods produced in neighboring countries unless borders are controlled to protect the local product in addition to protecting exchange rates from currency smuggling.
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