The Iraqi dinar continues to fluctuate against the dollar between an unprecedented decline since 2004 and a partial rise, as one dollar last Tuesday reached about 1,600 dinars, before it recorded yesterday, Wednesday, the level of 1,570 dinars, to drop today, Thursday, to about 1,535 dinars, in A time when the central bank sells the dollar for 1460 dinars.

The instability of the exchange rate was quickly reflected in the movement of the market, with the rise in consumer prices and the recording of an economic stagnation, which left the government in great embarrassment, especially since the head of government, Muhammad Shia al-Sudani, had been criticized many times before taking office last October. The government of former Prime Minister Mustafa Al-Kazemi raised the official exchange rate from 1182 to 1460 dinars to the dollar in December 2020.

Mazhar Muhammad Salih attributed the dollar's rise to international policies that led to a decline in supply in the Iraqi market (Al-Jazeera Net)

Many reasons

Many observers of the Iraqi economic affairs link what is happening to the weakness of monetary policies in the country, the control of partisan and other armed parties over the financial market, and the smuggling of hard currency abroad, with certain companies working in the fields of foreign remittances controlling the price of the dollar through what is described as a "speculative war." .

Amidst fears that the crisis of the high dollar exchange rate will lead to an increase in poverty rates - which amounted to nearly 25% this year - or an increase in social unrest in the midst of the current demonstrations led by graduates demanding government appointment, Mazhar Muhammad Salih, the financial advisor to the Prime Minister, believes that the issue is related to contexts The US Federal Reserve (US Central Bank) recently took place as a result of fear of suspicious and questionable transfers.

New conversion system

Speaking to Al-Jazeera Net, Saleh explained the reasons that led to the dollar's rise and the nature of the new procedures, and said, "Iraq's money is in dollars as reserves deposited in the account of the Central Bank of Iraq at the American Central Bank in New York, which is requested through transfers by customers and banks," and added that "the authorities The international community was not aware of the nature of these requests that come from Iraqi banks.

And he continued that in the recent period, these international bodies have become concerned that many of these requests do not serve the Iraqi economy, and therefore the Central Bank of Iraq has developed a new special platform for remittances, and the US Central Bank can now notice some irregular and suspicious requests, which led to its rejection.

Accordingly, according to Saleh, the refusal of foreign transfers reached 75%, pointing out that the demand for dollars now exceeds the amount of supply in the market, which ultimately led to an increase in the exchange rate, as he put it.

Sajjad Salem believes that the reason is the American pressure on the Iraqi government and the armed factions (Al-Jazeera Net)

American controls

On the other hand, the economic and political researcher Nabil Jabbar Al-Ali believes that the issue is related to the path of remittances that were stopped as a result of the restrictions or controls imposed by the US Central Bank recently, pointing out that these measures prompted to divert the path of these remittances towards transferring the currency to regional countries that suffer from weak flows dollar to it, pointing out that these new paths caused an increase in the price of the dollar as a result of increased demand locally without financial reinforcements.

A member of the Finance Committee in the Iraqi parliament, Sajjad Salem, goes in the same direction, who confirmed that the dollar’s ​​rise is due to the US position on the current government, and Washington’s fear of armed factions dominating the Iraqi political decision and infiltrating important security and intelligence services, as he put it.

He explained to Al-Jazeera Net that this fear is present among some important and supportive political parties of the Iraqi state, and that it is not from the American side alone, commenting, "Those parties are affiliated within the Coordination Framework Coalition," adding, "As a result, the Iraqis today pay a heavy tax for the non-compliance of the participating parties in the government." the general policies of the state.

Despite the statements of the Central Bank of Iraq on the reasons for the rise in the exchange rate, it did not determine the validity of the rumors that the US Central Bank imposed restrictions on the transfer of US currency to Iran in ways that are not accepted by the US Treasury Department, as the Al-Jazeera Net correspondent’s attempts to obtain any comment did not succeed. from the Central Bank of Iraq.

Nabil Jabbar Al-Ali: Changing the course of remittances to regional countries caused an increase in the exchange rate of the dollar (Al-Jazeera Net)

Mixed expectations

Dealers in the Iraqi banking market reported that the exchange rate of the dinar recorded tangible gains this morning, Thursday, with the start of a number of governmental and private banks to sell the dollar at the official price approved by the Central Bank, which amounts to 145 thousand dinars for every 100 US dollars, as the government Rafidain Bank and 10 private banks started hours ago. Al-Sabah is the first to offer the dollar at the official rate to customers and traders for treatment and trade purposes, in a government effort to stop speculation in the foreign exchange market.

The head of the Iraqi government, Muhammad Shia al-Sudani, had urged the Central Bank of Iraq to intervene to control fluctuations in the exchange rate of the dollar, and to work to take the necessary measures to prevent illegal speculation, calling for activating steps to sell foreign currency at official prices for citizens through purchasing with electronic cards, and opening sales outlets for travelers or Patients outside Iraq or financing foreign trade in accordance with fundamentalist contexts and international standards.

The Governor of the Central Bank presents to the Prime Minister @mohamedshia the positive position of the financial situation, stressing that the crisis regarding foreign currency is an emergency crisis for technical reasons, and coincided with the work of the new electronic platform and the delay in transfers due to the Christmas holidays.

- Media Office of the Prime Minister 🇮🇶 (@IraqiPMO) December 27, 2022

Despite the dollar’s ​​exchange rate recording a slight decrease today, Thursday, in the midst of the US Central Bank’s procedures and the Iraqi Central’s controls, the researcher in economic affairs, Abdul Salam Hassan, expects the continuation of the crisis, and he also predicted that the dollar’s ​​exchange rate in parallel (black) markets would reach two thousand dinars per dollar. In his interview with Al-Jazeera Net, he pointed out that "America is serious about perpetuating pressure on the Iraqi Central Bank because of its dissatisfaction with the continued smuggling of currency to regional countries."

On the other hand, and by returning to the financial advisor to the Prime Minister, who believes that the crisis of the high dollar exchange rate is "temporary", and that it will end with the regularity and transparency of transactions carried out by the private sector in the demand for foreign currency from the currency sale window in the Central Bank of Iraq, pointing out that This temporary increase will not affect the approval of the country's general budget due to the financial abundance available to Iraq, in addition to the increase in the Iraqi cash reserves to about $100 billion, which is the highest level in the country's history.

The economist Nabil Jabbar Al-Ali agrees with this opinion, who indicated that this crisis will be temporary in the event that additional restrictions are not imposed by the US Central Bank, adding that the Iraqi government is determined to find economic solutions, and that what hindered that was the coincidence of the exchange rate rise at the end of the year. Financial and many banks stopped in order to conduct the final accounts, as he put it.

In an attempt to control the exchange rate, the Central Bank of Iraq said that it had taken several measures since last week in order to stabilize the exchange rate of the dollar, while referring to the nomination of a number of banks to sell dollars to citizens on public holidays.