Wissam Al-Shammari did not know when he imported production supplies for his poultry fields, that great losses awaited him at the end of last week, with the rapid decline of the Iraqi dinar price against the dollar, against the backdrop of the Iraqi Central Bank’s decision to devalue the local currency, in conjunction with a stifling financial crisis plaguing the country As a result of the collapse in oil prices due to the Corona pandemic.

Al-Shammari says that the loss caused by the new exchange rates of the dinar lies in the fact that producers of raw materials for the poultry sector that are sold to local poultry fields import the materials in dollars, and then they are sold to breeders working in the fields in the Iraqi currency who pay after selling their products to the market, and here begins a chain Losses.

The simple citizen is most affected by the depreciation of the Iraqi dinar (Al-Jazeera)

Al-Shammari added to Al-Jazeera Net that the sudden decline in the exchange rate of the dinar against the dollar caused a financial gap, and the value of raw materials increased by more than 30%, at a time when the profit margin from this process is estimated between 10% and 15% only.

He explained that whoever bought raw materials with a million dollars lost about 200 thousand dollars in a matter of hours due to the change in the exchange rate, indicating that the losses of his project doubled in batches in the past days, and reached 10 million Iraqi dinars by the day's coming.

On Sunday, an official source in the Central Bank confirmed the launch of the new pricing for selling the US dollar in the public auction to sell the currency, which set 1450 dinars instead of the previous price of 1190 Iraqi dinars per US dollar.

The source said to Al-Jazeera Net that the Central Bank started implementing the new price for selling the dollar, adding that the dollar was sold in today's auction for 1450 dinars, so that every $ 100 equals 145 thousand Iraqi dinars.

The Iraqi local markets in Baghdad and other provinces have been turbulent since last week, after reports talked about devaluing the currency after a sudden leak of the 2021 draft budget that included the new exchange rate.

Dagher believed that the new price problems will last for about two months, and some will need clan solutions (communication sites)

Big losses

At the International Book Fair in Iraq, which concluded its activities on Saturday evening in the capital, Baghdad, Iraqi publishing houses suffered great losses due to the decline of the dinar exchange rate against the dollar.

And a number of publishing houses owners indicated to Al-Jazeera Net that they have suffered significant losses due to the difference in the exchange rate of the dollar, especially those who deal with Arab publishing houses, as it cost them to pay what they owe in terms of wages, losses of 20 thousand dinars per 100 dollars, in addition to that, the Buying new publications, according to the new dollar exchange rate, will expose the book market to confusion, due to the sudden increase in book prices, which a large group of readers will not be able to acquire.

Economic expert Mahmoud Dagher says that "the problems of the new prices will last about two months, and some will need tribal solutions," noting that "those dealing with traders in the Iraqi market will face difficulties in payment and may disagree about them, although they did not contribute to making the problem, and the government did so after the alternatives were exhausted." .

Dagher added to Al-Jazeera Net that the Iraqi market needs time to coexist and organize its dealings and settle previous financial dealings before and after the change of the exchange rate, to reach settlements between wholesalers and retailers and owners of goods, stores and stores, as well as the problems of contractors in the country who deal with the old exchange rate.

A number of shopkeepers, markets and bread ovens confirmed that the market was affected by the decline in the value of the local currency against the dollar, while they indicated that the value of raw materials increased in the main stores that deal in dollars as a fixed currency.

Cougar considered that the devaluation of the dinar is a government plan to reduce the fiscal deficit and achieve an abundance of revenue (Al-Jazeera)

Governmental plan

Since the collapse of oil prices earlier this year, Iraq is facing an unprecedented liquidity crisis, the government of Prime Minister Mustafa Al-Kazemi has been forced to borrow from the bank's reserves in dollars to pay nearly $ 5 billion a month, representing public sector salaries and pensions.

Member of Parliament’s Finance Committee, Jamal Cougar, stated that the dinar’s decline against the dollar is an organized government plan to reduce the fiscal deficit and achieve an abundance of revenues.

Cougar said to Al-Jazeera Net, "The Iraqi government is deliberately raising the price of the dollar against the Iraqi dinar to provide large financial differences in the hope of achieving financial abundance for the state treasury."

He pointed out that "Iraq gets a dollar from selling crude oil, and distributes salaries to employees in local currency, and the government believes that it will achieve financial abundance in the event that the value of the dinar falls against the dollar."

Cougar considered that the policy of raising the price of the dollar against the dinar is "a failure" and harms the Iraqi citizen and limits his financial and purchasing power in the local market, given that prices will rise in the local markets as the value of the dinar decreases.

Prime Minister @MAKadhimi: Through the reforms we have adopted, we seek to fight corruption and the corrupt, advance the Iraqi economy and create a better near future that preserves the dignity of citizens.

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- Media Office of the Prime Minister 🇮🇶 (@IraqiPMO) December 19, 2020

Al-Kazemi justification

The decision sparked a wave of anger in the Iraqi street, but Al-Kazemi defended his government's move and said that he had two options: "Either the collapse of the regime and enter into complete chaos, or we enter into a Caesarean section for reform."

Al-Kazemi cited during a speech at the Iraqi Cabinet session held yesterday evening, Saturday, in several countries, including South Korea and Singapore, when they had previously taken "difficult decisions" in order to reform the economy.

Several political blocs in Parliament criticized the decision to devalue the Iraqi currency against the dollar, while the leader of the Sadrist movement, Muqtada al-Sadr, said that "the central bank and all other banks are prisoners of corruption and the corrupt, and the government and parliament must seek specialized methods to end this and liberate it immediately."

Al-Sadr added in a tweet on his Twitter account: "It is not enough to float the currency, as this may be a double-edged sword, so Iraq will emerge from a crisis that is more severe than it, and the only one affected is the people with their strength and bread."

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- Muqtada al-Sayyid Muhammad al-Sadr (@Mu_AlSadr) December 19, 2020

At a time when Iraq is still under the weight of a stifling financial crisis that has not been witnessed in decades, popular fears have surfaced that this could be reflected on the standard of living for the general population and the poor classes in particular, with an awaited battle between the government and parliament to pass the decision within the House of Representatives, and scenarios. Similar to what happened when the government resorted to borrowing.