The citizen wonders: When will exchange rates be controlled, 12 OCT

The citizen wonders: When will exchange rates be controlled, 12 OCT

In general, the average citizen does not have a direct interest in the dollar or its associated exchange rates. The majority of the population consists of employees, retirees, earners, those covered by social protection, the unemployed, those with special needs or those who are unable to work, and most of them manage their livelihoods with the dinar. They receive salaries, wages, subsidies, or other methods of payment, which are often limited and may not meet the requirements of subsistence living. Although the dollar has been involved in important events, such as smuggling, waste, and money laundering operations, most citizens have nothing to do with it. 

The Central Bank has opened the currency window to protect people from dollarization, and through it, business owners can trade dollars by importing goods that constitute a significant percentage of consumption. This means that the majority of Iraqis can obtain their needs for local and imported goods and services at almost stable prices because the dollar is insured for those who need it. Therefore, the poor can give up the dollar in exchange for the relative stability of prices in the markets. The dollar is only necessary for specific cases, such as travel, study, immigration, or treatment.

The government led by Mr. Al-Kadhimi triggered a crisis in the livelihoods of the people by changing the exchange rates to 1,450 dinars per dollar in agreement with the Central Bank and some politicians, without adequate measures to compensate for the decrease in purchasing power and the consequent rise in prices, which affected many categories of people. This caused great difficulties for those with limited income and the destitute, forcing them to adjust to the new reduction in dinar prices without any change in the salaries of employees and retirees.

 The change also led to the manipulation of prices by some unscrupulous sellers and exploiters, even though the exchange rates were only 1,480 dinars per dollar on the black market. When the Al-Kadhimi government was replaced, many hoped for a return to the previous exchange rates. The new government, led by Mr. Sudan, initiated a series of reforms aimed at improving the lives of its citizens and decided to reconsider the exchange rate, setting it at 1320 dinars per dollar. While this still exceeded the previous rate, it was seen as a positive step towards reducing prices and achieving a balance between family income and spending requirements.

It is believed that the increase in oil prices will lead to an improvement in living standards. Last September, the country earned $9.494 billion from the sale of oil. However, it is puzzling how the price of eggs could jump from 6 to 8 thousand dinars within days despite the country’s huge revenues. This is especially concerning as the salaries of employees and retirees have not increased in dinars, and workers in the private sector are experiencing a decrease in income due to market downturns and economic recession.

The government and the Central Bank have implemented measures to control the dollar exchange rates on the black market, however, the situation has not improved and is in fact worsening. The current exchange rate is 1640 in the markets, compared to 1320 for the official rate. This means that the Central Bank is selling more than 240 million dollars a day to meet import needs.

 It is reasonable to question the effectiveness of these sales, as the logic of reason suggests that if the markets require 50 million dollars to meet the demand for the dollar, then where is the impact of the sales, given that remittances amount to ten times the demand in black? Furthermore, where do the billions go when the state covers travel needs and other expenses? It is not reasonable for these millions to be smuggled in cash while the state has a constitution, security, judicial and regulatory apparatus, and spends trillions on them. This raises numerous questions, and the citizen should not be blamed for asking them. There are concerns that the price will exceed 1,700 within days and may cross the 2,000 dinar barrier in the coming weeks.

There is growing concern over the rise in the dollar exchange rate. This is due to expectations of stability being dashed again and again, as has been the case since February. Despite economic advisors’ predictions, the situation has not improved. Just yesterday, the Prime Minister’s Advisor for Investment Affairs predicted that stability in the dollar exchange rate against the Iraqi dinar in the parallel market would return within two months. He noted that what should have been achieved in six years is now being attempted in just one year, which has significantly impacted the dollar exchange rate.

 He also highlighted widespread corruption within certain banks and banking companies, which has led to the smuggling of dollars. When asked if the price of the dollar will continue to rise, the answer was yes, it may continue for a while. However, it is expected that within a month or two, the exchange rate will begin to decline due to 70% of trade in Iraq moving to the electronic platform.

In a related development, the State of Law coalition has proposed a new government project that involves the adoption of currencies other than the dollar for trade exchange with three countries, including China, Iran, and Russia. A leader in the coalition explained that if implemented correctly, this project could help reduce the demand for dollars in Iraqi markets. 

He stressed that the current rise in the dollar exchange rate in Iraq cannot be reduced by any party, including the Central Bank, as long as the demand for it remains high. Regarding America’s position on this new project, he clarified that the US has nothing to do with it. It does not matter whether or not America agrees with the project to create a currency other than the dollar for Iraqi commercial transactions, as long as there is a will from Iraq and the other countries involved.

If we rely on the statement that assumes prices will be controlled after two months or on the statement that introduces a new plan for trading in non-dollar markets, without specifying its duration, we must ask ourselves: How can the average citizen cope with the dinars he receives or earns? Does he manage his finances day by day or month by month? Who can guarantee that the prices of goods and services will not continue to rise when there is no hope of increasing salaries for employees and retirees in the near future?

 Any increase in salaries is directly linked to the budget that was prepared for three years, and it suffers from an annual deficit of more than 60 trillion dinars. Furthermore, our economy is highly dependent on oil exports, the value, quantity, and prices of which are subject to international variables and events that are becoming increasingly complex. Therefore, we need practical solutions to answer all these questions. When we ask these questions, our goal should not be to give in to despair but to formulate actual solutions to what is happening and not to fill pockets with wishful thinking.