Iraq’s Central Bank Witnesses Surge in Foreign Exchanges Amid Economic Challenges
The Central Bank of Iraq’s (CBI) foreign exchanges have witnessed a substantial 86% rise, hitting a marked $199 million in cash sales. These transactions, covered at an exchange rate of 1,305 dinars per dollar for various exchanges and at the rate of 1,310 dinars per dollar for foreign transfers, primarily bolstered balances abroad in the form of transfers and credits, amounting to $199,757,755. Cash dollar purchases were made by four banks, while 22 others sought to enhance their foreign balances. A total of 48 exchange and intermediary companies engaged in the auction.
Implications of Rising Dollar Prices
Despite this significant increase, concerns over escalating dollar prices in Baghdad and Erbil have induced market closures. Adding to the economic instability are reported Turkish artillery attacks in the Kurdistan Region of Iraq (KRI). Further exacerbating the economic challenges is the surge in gold prices in both cities.
US Federal Reserve Restrictions: A Restricting Factor
Moeen al-Kadhimi, an Iraqi lawmaker, attributes the Iraqi government’s inability to control the exchange rate between the US dollar and the Iraqi dinar to the US Federal Reserve’s restrictions on external transfers from Iraqi banks. These impediments have affected daily transactions necessary for merchants, leading them to source US dollars from the parallel market, thereby inflating the exchange rate despite the Central Bank’s efforts.
Long-term Policies: The Need of the Hour
Al-Kadhimi proposes long-term policies to liberate Iraq’s financial system from growing US imposed restrictions. Suggestions include depositing oil deal revenues in the central bank instead of the US Federal Reserve and using other hard currencies in oil transactions. Al-Kadhimi perceives these restrictions as politically motivated. Despite market fluctuations, he opines that the Iraqi markets remain relatively stable. However, the consequences of rising dollar prices and market closures are significant for the economy and the Iraqi citizens.
Conflicting Reports and Speculations
Despite the challenges posed by these rising dollar prices, speculations on the Iranian Rial and the Dollar in Iraq have led to heavy losses. As the dollar recovers, dollar exchange rates in Iraq have seen a decline, and gold prices have dropped. The CBI has dismissed news about dealing with the ‘Libyan dollar’ as fake, hinting at potential misinformation.
The complexity of Iraq’s financial system is evident. While the CBI reports a significant increase in foreign exchanges, rising dollar prices, market closures, and US Federal Reserve restrictions continue to challenge the Iraqi economy. It is imperative for the government and relevant authorities to address these issues and implement long-term policies for financial stability and to mitigate impacts on Iraq’s citizens.
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