Iraqi dinar falls a week before dollar selling platform closes, 27 DEC

 Iraqi dinar falls a week before dollar selling platform closes

For days now, the Iraqi markets have witnessed a noticeable decline in the value of the Iraqi dinar against the US dollar , amidst confirmations by Iraqi financial experts that this rise is due to the imminent closure of the foreign currency selling platform, specifically the dollar, by the Central Bank of Iraq as part of a series of reforms it had pledged at the beginning of last year.

For about 18 years, the Central Bank of Iraq has been carrying out dollar sales operations against the Iraqi dinar with the aim of maintaining a stable value for the dinar and reducing the burden of speculation in the market. However, a number of reasons prompted it to stop what is known locally as the “dollar auction,” including dollar smuggling operations to neighboring countries and huge money laundering crimes , which Washington says are in the interest of Iranian parties, most notably the Iranian Revolutionary Guard.

Today, Thursday, the value of the Iraqi dinar decreased against the dollar, by 1520 dinars per dollar, after it had maintained a value of between 1480 and 1500 dinars per dollar in the parallel market, while the value set for the dinar by the Central Bank is 1320.

In this regard, member of the Finance Committee in the Iraqi Parliament, Mohammed Radhi, told Al-Araby Al-Jadeed, “The decline in the value of the dinar in the parallel market, not its official value, is due to the imminent suspension of the dollar selling platform by the Central Bank. This step caused fear in the local market, which prompted traders to increase demand for the dollar from the parallel market, which led to its rise.”

He expected the rise to be temporary for a period of time, “after getting used to stopping the platform and adopting the normal thing, which is going to banks and official banks to conduct foreign commercial transfers,” stressing that “the Central Bank of Iraq has expanded the basket of foreign currencies that can be dealt with and ended reliance on the dollar only, and this diversity will reduce the dollar exchange rate in the parallel market and raise the value of the Iraqi dinar in the future, and the tasks of the Central Bank will be limited in the coming days only to monitoring and following up on the work of local banks covered by direct foreign commercial transfers, and not selling the dollar to merchants.”

In contrast, the financial and economic advisor to Prime Minister Mohammed Shia al-Sudani, Mohammed Saleh, said in press statements today, Thursday, that “the difference between the two exchange rates in the market is basically stable for reasons related to controlling the sale of cash dollars from legal outlets to travelers in an organized manner and subject to a precise rule of compliance and auditing, in addition to the ability of the traveler to obtain other permitted amounts through payment cards in all their forms, and in sufficient and comfortable amounts at an exchange rate of 1320 dinars per dollar.”

Saleh added, “It is expected that the market, due to the end of the previous foreign transfer platform and the transition to new mechanisms to enhance foreign currency to meet the banks’ needs for foreign currency to finance foreign trade, was accompanied by a wave of misinformation, misunderstanding and confusion that was exploited by the parallel market and speculators for quick profit.”

The financial and economic advisor to the Prime Minister considered that this increase is “called a temporary market bubble that is built on unrealistic speculations and disappears over time, which requires attention to the phenomenon of exploitation and profiteering generated by false and baseless information.”

In early 2023, Iraq announced the adoption of an electronic platform to monitor the movement of dollar sales and money laundering operations, following warnings issued by the Federal Reserve (the US central bank), in addition to the Treasury Department punishing several local banks for their involvement in suspicious activities. A statement by the bank stated that “it was decided to expand the external transfer channels for local banks to include new currencies: the Jordanian dinar and the Saudi riyal, and to allow Iraqi banks to finance trade with Turkey in euros after it was previously limited to using it with European Union countries, in addition to transfers available in US dollars, Emirati dirhams, Chinese yuan and Indian rupees.”

Previous decisions by the US Treasury to impose sanctions on 18 Iraqi banks for financial dealings with Iran and others linked to money laundering operations caused a swift backlash inside Iraq, causing the value of the dinar to decline and depositors to flock to the sanctioned banks to withdraw their dollar deposits. With more than $113 billion in reserves in the United States, Iraq relies heavily on Washington’s goodwill to ensure that its oil revenues and cash are not subject to US sanctions.

Last October, the US government rejected an Iraqi request for $1 billion in cash from the Federal Reserve from Iraqi funds generated from oil revenues, due to its opposition to efforts to curb excessive dollar circulation and stop illicit cash flows to countries banned by the US Treasury.

alaraby.co.uk