The Dinar Collapses Against The Dollar.. Is The Specter Of 1600 Looming On The Horizon?
October 3, 2024 Baghdad/Al-Masala: The dollar price witnessed a noticeable increase against the Iraqi dinar during the past few days, as the exchange rate reached 1,550 dinars per US dollar.
This increase has raised great concern among economic and popular circles due to its direct impact on the local market and on the standard of living of citizens.
Economic analyst Munar Al-Abidi explained that there are a number of reasons behind this rise in the US currency against the dinar.
One of the most prominent reasons is the decline in transfers of other foreign currencies, such as the UAE dirham and the Chinese yuan, as a result of the significant restrictions imposed by correspondent banks that are in the process of strengthening the balances of these currencies.
These restrictions directly affected the fluidity of transfers and weakened the possibility of obtaining other foreign currencies on which the Iraqi economy depends.
In addition, the Citi-Pilot project faces clear challenges, as the banks participating in it are reluctant to open new accounts for operating companies, as their dealings are limited only to companies with which they have previously dealt.
This limited approach reduces the ability to use these banks as channels for external remittances, increasing pressure on the US dollar and limiting the availability of alternatives.
The current currency exchange mechanisms were unable to cover the increasing demand for foreign currency, especially for the purpose of importing some of the most valuable goods, such as mobile phones and gold, which prompted importers to resort to the parallel market, and contributed significantly to increasing pressure on the dollar and raising its price in the local market.
Expectations indicate that the decline of the dinar against the dollar may continue during the coming period.
If practical measures are not taken to address these issues, the exchange rate could reach 1,600 dinars per dollar in the coming months. In order to address this challenge, there are several solutions that can help calm the situation. One of these solutions is to increase the network of correspondent banks around the world, especially in the UAE and China, which could help facilitate remittances and increase the flow of foreign currency into the country.
The solutions also include controlling financial policy by limiting the import of some goods that contribute to increasing demand for the dollar, in order to reduce pressure on foreign currency.
Pressuring banks under the Citi-Pilot project to be more open could help accept a wider range of customers, which would help ease pressure on the dollar and diversify the channels available for remittances.
In addition, it may be necessary to temporarily ban the import of some goods to reduce the demand for foreign currency until more organized and smooth solutions for the foreign transfer process are found.
The rise in the dollar exchange rate against the dinar is the result of a combination of economic and financial factors, including weak banking infrastructure, difficulty in accessing remittances, and increased demand for foreign currency for import purposes.
The current situation reflects major challenges that require rapid and effective action from the Iraqi government and the Central Bank to restore stability to the financial market.
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