Liberating The Dinar From The Official Rate... Obstacles And Solutions
With the return of fluctuations in the dinar exchange rates, there is renewed talk about the necessity of getting rid of the “official price” with the aim of reducing the difference with the price in the parallel market, by subjecting the local currency to global supply and demand, similar to other countries,
but many obstacles stand in the way of this step, among them
“The unilateralism of the Iraqi economy, which relies on oil and government revenues, and the absence of correspondent banks in the dinar currency, according to specialists, also called for taking other possible solutions, such as “deleting the zeros” from the currency, and withdrawing the cash mass from citizens and transferring it to banks.
“The Iraqi dinar’s exchange rate follows a system of fixed exchange rates, and that
the process of approving the exchange rate is one of the monetary policy tasks of the Central Bank of Iraq as it is the independent body, especially since Iraq depends primarily on oil sources that provide... Foreign currency, and
therefore oil revenues are transferred to the Central Bank of Iraq, and reserves follow the exchange mechanism between the dinar and the dollar, given that the Central Bank is the source of exchange between them.”
The dollar exchange rates in the local market witnessed great fluctuation during the past days, as it suddenly decreased to 148 thousand dinars per 100 dollars, and quickly rose again to 150 thousand dinars, and then continued to fluctuate until it reached 154 thousand dinars per 100 dollars, after its price was approaching... About 157 thousand dinars. Saleh adds,
“The balance and stability of the price in flexible exchange systems requires a financial and banking market, in which interest rates play a major role in the inflows and outflows of foreign currency, and
this is something that is not available in Iraq, and the mono-economy is dependent on the inflows of foreign currency.” On government oil revenues, and here the forces of supply and demand are inconsistent with the unilateralism of the economy.” He continues,
"The economy is sometimes exposed to a large deficit in the current account and the balance of payments, and the general budget is also exposed to a deficit.
Here loans are resorted to and governments are forced to reduce the national currency until foreign currency becomes expensive.
This is called financing from inflation, and
despite the fact that This conflicts with the policy of the Central Bank, but is done in consultation with monetary and fiscal policies.”
He points out that “the function of the central bank in general is to maintain the exchange rate and its stability for a long period,
but this relates to the nature of the current account and the balance of payments, and whether there is a surplus or a long-term or stable deficit, as well as the nature of the budget, is it expansionary or contractionary, so the
The issue is not easy, as
all we need in the exchange rate is a circle of consultation and communication between monetary and financial policies to maintain its stability.”
It is noteworthy that since the beginning of the exchange rate crisis more than two years ago, many options have been put forward to control it, including
printing new denominations of cash, including 100 thousand dinars, or
deleting three zeros
to control the rise in the value of numbers in monetary transactions.
Since the 1990s, and during the imposition of the economic blockade on it, Iraq has suffered from significant inflation in the currency, which prompted the previous regime to go to print the currency locally, and after the year 2003, the previous currency was destroyed and new denominations were issued, and its exchange rate against the dollar was fixed, by decree.
From the civil governor of Iraq at the time, Paul Bremer, who revealed the shape of the new currency and its exchange rate against the dollar.
For his part, economic expert Nasser Al-Kinani explains,
“With regard to the fluctuation of the dinar, the central bank was selling the dinar for 1,118 per dollar, and then it changed since the arrival of former Prime Minister Mustafa Al-Kadhimi to power and the appearance of the white paper, as its price rose and became 1,450 dinars, in addition to This caused the Iraqi dinar to rise until it currently reached 1,530 dinars per dollar in the local market, but despite this, solutions can be developed for this problem.” He explains that
"the solutions revolve around reprinting the currency again and zeroing it,
especially if the printing process is accompanied by the process of retrieving the money stored inside homes to the banks.
Hence, it is possible to stabilize the Iraqi dinar by giving the banks a percentage for each citizen who owns an account or opens an account within the bank, for example, 10 percent, which would be 10 percent." As a deposit for the citizen inside the bank.” He continues,
"The above steps will lead to solving the import issue that the government is suffering from now, and
it is trying to control it to limit the smuggling process.
Stabilizing the currency and revitalizing local industry and agriculture will, in general, lead to solving all economic and currency problems."
According to the Central Bank of Iraq website, Iraq includes 80 operating banks, including 62 local banks and 18 banks that are branches of foreign banks.
It is noteworthy that the Iraqi banking sector is neglected by citizens who have lost confidence in it, and according to World Bank figures issued last year, only 23 percent of Iraqi families have an account in a financial institution, which is a percentage among the lowest in the Arab world,
especially since the owners of those Accountants are state employees whose salaries are distributed to public banks at the end of each month, but these salaries also do not remain in the accounts for long, as queues quickly form in front of banks from employees who withdraw their salaries in cash and prefer to keep them at home.
For his part, financial and economic expert Mustafa Akram Hantoush explains,
“The local Iraqi currency is printed by the state and gives its value in exchange for other currencies or gold, that is, currencies or metals in the global supply and demand market.” Hantoush points out,
“The currencies that are exposed to the supply and demand market are currencies that have countries that have correspondent banks for their currencies, for example the dollar.
There are banks that correspond in dollars so that the whole world receives and trades them, and therefore such a currency is considered a flexible currency with variable prices.” He continues,
"The Iraqi dinar had correspondent banks in a global currency that was dealt with in the field of global trade, and
here the demand for it will become higher and the value of the dinar will rise.
However, Iraq as a country does not currently have correspondent banks, so the national currency it owns is a local currency and is not subject to supply and demand." Global, as
it is a currency issued for other currencies, and the process in it is fixed and does not rise to be a global process.”
It is noteworthy that Washington entered into the crisis of dollar smuggling last year, and Iraq was subjected to the global SWIFT system, which created a gap between the parallel and official market, and increased the loss of confidence in Iraqi banks, as dozens were subjected to American and Iraqi sanctions without processing depositors’ funds, in addition to the involvement of... Most banks are currently engaged in smuggling operations, according to what the US Treasury Department confirmed.
Saturday, 01-13-2024, PM 9:01 Karar Al-Assadi 225 https://www.non14.net/public/163518
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