The rise of the dollar is causing concern for the poor in Iraq due to increasing consumer prices and complicating their daily lives. This segment represents the majority, with the high exchange rate against the dinar adding to their worries.
The US Federal Reserve requires currency sale windows to display lists of sold dollars including the names of buyers and beneficiaries. The goal is to ensure that the purchase process is free of entities subject to international embargoes or sanctions by the US Federal Reserve (Iran, Syria, Lebanon and Yemen). This procedure may delay the sale for up to seven days, according to economists.
I heard that the exchange rate of the dollar went up against the Iraqi dinar in the Baghdad stock exchange recently, reaching almost 160,000 dinars for $100. It’s interesting to note that this is the first time this kind of increase has happened since 2003. However, it seems that the rate has since decreased again.
The increase in the value of the dollar in the Iraqi local market led to a rise in commodity and foodstuff prices.
In an effort to combat the crisis, the Central Bank of Iraq has announced measures to control the dollar exchange rate. The Board of Directors of the Central Iraqi Bank discussed the effects and consequences of rising exchange rates in local markets, as well as the temporary pressures that the foreign currency exchange rate has been subject to in recent days due to internal and external factors. They have implemented measures to safeguard the banking sector, customers, and the financial system, and since the requirements of foreign trade (for the purposes of documentary credits or transfers) are fully covered by the official rate, i.e. 1465 dinars to the dollar for documentary credits and 1470 dinars to the dollar for transfers.
Banks review
The Central Bank of Iraq urged merchants to directly review banks instead of relying on brokers or speculators to avoid excessive commissions and expenses. This is in reference to Council of Ministers Resolution 351 of 2022, which calls for the non-payment of customs duties and tax amounts in advance to reduce excess loops, ease procedures, and remove costs resulting from pre-demarcation problems. Additionally, the Central Bank of Iraq announced the facilitation of foreign currency (dollars) procedures for travelers by expanding the outlets for selling foreign currency in cash through an increase in bank outlets.
On December 27th, Prime Minister Muhammad Shia al-Sudani met with Governor Mustafa Ghaleb Makhaif of the Central Bank of Iraq. Al-Sudani received a detailed presentation on the rise in foreign currency exchange rates and the bank’s measures in this field.
The Prime Minister called on the Central Bank to achieve stability in prices and the exchange rate, as mandated by Articles Two and Three of the Iraqi Central Law. These provisions require the Central Bank to promote exchange rate stability, regulate and supervise the activities of banks, enhance payment system safety and efficiency, and develop the payment system. Al-Sudani emphasized the need to take measures to prevent illicit speculation, and anything that harms the local market and contributes to price increases.
electronic cards
He suggested implementing measures to allow citizens to buy foreign currency at official prices using electronic cards, opening sales outlets for travelers and clients outside Iraq, and financing foreign trade. These measures are in line with fundamentalist contexts and international standards for opening documentary credits and remittances.
The bank governor presented a positive financial report to the Prime Minister. He emphasized that the foreign currency crisis was an emergency due to technical issues, and it coincided with the work on the new electronic platform. The delay in transfers was also due to the Christmas holidays. The governor praised Cabinet Resolution No. Customs for preventing double taxation and collecting taxes at border crossings for goods entering from government ports.
A major economic recession in Iraq may result from the fluctuation of the exchange rate, which could impact investor appetite for new projects.
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