The effect of the rise in the dollar exchange rate continues in the parallel markets in Iraq, especially after the exchange rate reached last Wednesday evening at about 1,700 dinars per dollar, at a time when the Central Bank sells it through a currency auction for 1,460 dinars, which led to the Iraqi Prime Minister Muhammad Shia’a al-Sudani revealing An upcoming visit by a high-ranking Iraqi delegation to Washington to discuss the dollar issue.
Al-Sudani attributed the main reason for the exchange rate fluctuations to international standards (Al-Jazeera)
What are the reasons for the rise?
Speaking during a television interview, the Iraqi Prime Minister confirmed last Tuesday that the main reason for the exchange rate fluctuations is due to international standards, and what is related to the relationship between the Central Bank of Iraq, the Federal Bank and the US Treasury Department.
Al-Sudani added that Iraq had agreed with the US Federal Reserve to implement a mechanism to control the movement of money transfers in accordance with the so-called "compliance standards" for the global banking system, pointing out that the mechanism came according to a memorandum signed with the Central Bank of Iraq two years ago to proceed with these procedures in order to be a central remittance system. Through an electronic platform through which transfers are checked.
He explained that the procedures were not at the required level in terms of qualifying Iraqi banks by the Central Bank and the previous government, as private banks and merchants were supposed to prepare for this electronic platform.
The Central Bank of Iraq began, since early last December, the implementation of the electronic platform system for selling dollars (Al-Jazeera).
What is the impact of the electronic platform?
The electronic platform - which the Central Bank of Iraq began implementing in early December - is known as a new audit method and the "SWIFT" transfer system, as is in effect in all countries of the world, which requires accurate details of external transfers that take place from Iraq, according to what the financial expert, Mahmoud Dagher, said.
The economist, Safwan Qusay, confirms that the decline in the volume of the dollar sold in the currency sale auction coincided with the increase in its exchange rate in the parallel markets;
It indicates that the four banks that the Central Bank of Iraq banned from entering the currency sale auction were acquiring nearly 40% of the central bank’s sales of dollars, pointing out that it is now on private banks to pre-investigate Iraqi money before purchasing the dollar in order to be safe from New central bank procedures.
Regarding the effects, Dagher told Al-Jazeera Net that the application of this electronic platform led to the return and rejection of many remittances, and that local banks reduced purchases of large amounts of dollars due to these severe measures.
Safwan Qusay believes that Iraq's need for dollars does not exceed 170 million dollars per day (Al-Jazeera)
How did the platform stop fraud in trade?
And with the start of work on the electronic platform and the Swift system, the Iraqi prime minister said during his televised meeting, "We always talk about the existence of forged invoices and the exit of money abroad through smuggling, and this is a reality," as Al-Sudani expressed his surprise at imports that amounted to about 300 million dollars per day.
Al-Sudani elaborated on this issue, saying, "This explains that the currency was smuggling abroad, and this has been a chronic problem for years," pointing out, "This money was coming out with forged bills, as the bills for importing iron previously covered all of Iraq. However, Those quantities did not enter the country."
The economist, Safwan Qusay, points out that the decline in the central bank’s sales of the currency did not affect the real trade in the country, especially with regard to registered companies that have bank accounts known and documented with the US Federal Reserve, which means - according to Qusay - that work is in accordance with the established trade system. With it in Iraq, the country was losing the dollar, as well as the government's collection of customs revenues from the introduction of imported goods.
In his interview with Al-Jazeera Net, he explained that the Iraqi government was collecting only 10% of the value of what goes as dollar transfers for foreign trade, which indicates the validity of what the Iraqi prime minister said that the dollar was fleeing from Iraq with forged invoices.
Ghanem Al-Abed excludes Washington's agreement to postpone the implementation of the Swift system in Iraq (Al-Jazeera)
What is the story of the Iraqi delegation's visit?
Meanwhile, the Iraqi prime minister revealed, in the televised interview, an upcoming visit by an Iraqi delegation headed by Foreign Minister Fuad Hussein to Washington on February 7 to discuss a number of issues, including the dollar issue.
Although the visit will focus in large part on discussing US federal procedures and talking about Baghdad's endeavor to postpone the implementation of the Swift system for a period of 6 months, Ghanem Al-Abed, a consultant at the Roaa Center for Studies, says, "The United States' support for the current Iraqi government is not free, but it is conditional on political and economic reforms and preventing smuggling dollars into Iran.
He adds, "Did the Iraqi government implement the American demands? It seems that the government did not comply with that, and therefore the visit of the Iraqi foreign minister to Washington will determine whether the latter is willing to receive the Sudanese or not, and if the United States refuses that, then it means that the government may be subject to economic sanctions." .
In his interview with Al-Jazeera Net, Al-Abed explained that this stems from what was recently revealed that Washington noticed an American currency in Iran that had arrived in Baghdad during the past two weeks, according to Al-Abed;
Which may contribute to a further deterioration of the Iraqi currency against the dollar, expressing his belief that Washington will not meet the Iraqi demands to postpone the work of the Swift system for a period of 6 months, as he put it.
Al-Jazeera Net correspondent was not able to obtain a comment from the Iraqi government about the objectives of the Iraqi delegation's visit to Washington, and the most important axes that the Iraqi side will discuss with its American counterpart.
As for the financial and economic expert, Basem Jamil Antoine, he believes that the planned Iraqi-American talks are still ambiguous, indicating that the Central Bank of Iraq had pledged to implement the Swift system, and that if Iraq did not comply with the American demands, this would lead to consequences he described as “not benign” on the Iraqi economy. as he put it.
Antoine: Dire economic consequences will face Iraq in the event of non-compliance with US demands (Al-Jazeera)
How many dollars does Iraq need?
In light of the decline in the quantities of dollars sold in the currency auction from about 300 million dollars per day to nearly 50 million dollars after the implementation of the electronic platform system subject to the Swift system, urgent questions arise about Iraq's actual need for dollars per day.
In this regard, Antoine explained - in his interview with Al-Jazeera Net - that Iraq's actual need for dollars ranges between 120 and 130 million dollars per day, based on the recognition that the Iraqi economy is not productive, but rather depends on imports to meet its local needs.
Returning to Safwan Qusay, he says that Iraq's actual need for dollars per day does not exceed 170 million at the upper limit, which may be consistent to some extent with the Iraqi Prime Minister's speech to Al-Iraqiya News Channel when he asked: "What has stopped life, changed, or lost something?" Markets during the sale of the central bank 30, 40 or 50 million dollars per day, except for the high prices in some materials, compared to what was sold in the central bank between 200 and 300 million dollars per day.
The Iraqi government has initiated several measures to control the prices of consumer items related to the daily lives of Iraqis, but the Iraqis are still waiting for measures to restore the exchange rate of the dollar to its previous position in light of the loss of the Iraqi dinar about 15% of its value during the past two months, according to what economists confirm.