THE RISE RETURNED TO THE MARKETS AND FEARS DISSIPATED.. WILL THE “PAPER”BREAK THE 200 THOUSAND DINAR BARRIER?
(The contents of this article contradict what the CBI is telling us in yet another article in todays news. My only conclusion is that propaganda is ramped in Iraqi news media too. These Iranian backed people simply do not want the CBI to succeed in the currency reform process.)
In light of a turbulent economic reality and markets fluctuating between anxiety and anticipation, the dollar exchange rate in the parallel market has returned to the forefront, casting a heavy shadow over citizens and traders alike.
The increasing rise of the dollar, which touched levels exceeding the 152,000 barrier for every 100 dollars, raised a wave of fears with serious warnings of the possibility of it exceeding the 200,000 dinar barrier for every 100 dollars, which may enter the market into a critical phase that threatens its stability.
(How many freekeh times must we read this crap about the dollar exceeding 200,000? This is all fear mongering and they need to crack down on the FAKE news in Iraq too. This is old propaganda news. I wish they would stop it. When the CBI talks I listen and this article is meaningless.)
Last month, the Central Bank announced the closure of the dollar selling platform by the end of the fiscal year (2024), a measure that comes within the ongoing directives of the US Treasury, according to it.
In conjunction with increasing warnings from the US Federal Reserve and sanctions imposed by the Treasury Department on some Iraqi banks for their involvement in suspicious activities, the Iraqi government announced, at the beginning of 2023, the launch of an electronic platform specializing in monitoring the movement of dollar sales and money laundering operations.
Expectations of a new jump in exchange rates
While citizens are worried about the repercussions of this crazy rise, traders stand perplexed in front of a turbulent market that swings between expectations and speculations, while voices are rising calling for urgent action by government agencies and the Central Bank to contain the crisis before it is too late.
(Yes, they are perplexed because the CBI just shot a hole wide open through their business of street trading the dollar. By the way this is now illegal in Iraq. You wouldn’t know it by reading this article.)
One of the owners of an exchange office in the Dora area, south of the capital, Baghdad, says, “The exchange sector faces major challenges as a result of the increasing pressures exerted by some security agencies in the context of monitoring dollar sales.”
The owner of the exchange office added, “These measures come within the context of efforts to combat manipulation of exchange rates or currency smuggling, but they are characterized by excessive complexity that negatively affects the course of work in the market.”
In 2023, the Wall Street Journal reported that “the Iraqi currency lost about 10 percent of its value (black market value), after procedures that were unclear to many, related to imposing compliance rules on the Iraqi Central Bank’s dealings with currency traders regarding the US dollar.”
While the owner of another office in the Al-Amiriya area, west of the capital Baghdad, says, “The excessive and sometimes unjustified interventions have caused confusion in the movement of trading within the local market,” noting that “most exchange offices are committed to the official laws and instructions, but there is a restriction that hinders daily transactions, which has increased the issue of the difficulty of accessing the dollar locally, which in turn has resulted in a new rise in exchange rates.”
According to the money changer, the market has been witnessing significant fluctuations in exchange rates in recent days, amid a clear shortage in the supply of dollars.
(Good, good, good this is what the CBI wants and needs to happen! 😊)
He explained that the current restrictions on exchange operations and the scarcity of dollars in the markets have led to an escalation in instability (instability of the black market) , which threatens to record significant price jumps in the coming days if the current situation continues, and it is possible to reach 200,000 dinars for every hundred dollars.
The owner of the private banking also called on the concerned authorities to “reconsider the procedures followed,” stressing “the need to find a balance between imposing control over exchange operations and ensuring the continuity of work in the market in a way that guarantees meeting the needs of citizens and traders without additional complications.”
In conclusion, the money changer believes that “the solution lies in providing sufficient dollar liquidity and ensuring transparent mechanisms for dealing with money changers, away from pressures that could lead to dire economic consequences.”
(Of course they do want to protect their money trading business since they earn a living illegally selling dollars at absorbent rates and want to stay in business. That’s what this article is really all about. Getting their hands on the dollars also leads to money laundering and corruption.)
The Iraqi Council of Ministers approved, on February 7, 2023, the decision of the Board of Directors of the Central Bank of Iraq to adjust the exchange rate of the dollar against the dinar, equivalent to 1,300 dinars per dollar.
The Iraqi dinar exchange rate was 1,470 dinars to the dollar before the New York Federal Reserve imposed stricter controls on international dollar transactions by Iraqi commercial banks at that time.
Speculation behind the dollar crisis
Unofficial estimates indicate that the platform used to sell up to $280 million per day, but last year the amount dropped to less than $240 million per day.
Rashid Al-Saadi, an economic expert, talks about several axes related to the rise in the dollar exchange rate in the parallel market during the recent period, pointing out the factors affecting the market and the means to calm it down.
Al-Saadi says, “The current rise in the dollar price is mainly attributed to supply and demand factors, especially at the end of the year and the beginning of the new year, and the presence of some official holidays also contributes to increasing pressure on the market.”
(The CBI strategy of going to the international standards of money transfers and payments is working….. 😊)
Al-Saadi added, “Speculation plays a major role in the rise in the price of the dollar, as price manipulation by some parties within the market causes fluctuations that lead to an increase in demand for the dollar and a significant rise in its price,” while believing at the same time that “the market currently will not witness a rise of up to 200,000 dinars for every 100 dollars, at least in the short term.”
Al-Saadi points to “the impact of the expected international political developments, especially with US President Donald Trump set to assume power again this month, and the repercussions that may accompany that on the international and regional scenes, including potential impacts on Iraq and Israel.”
During his speech, Al-Saadi presented a set of urgent recommendations that could contribute to calming the market and ensuring its stability:
First: Restricting the disbursement of salaries.
Second: Strengthening the media aspect.
Third: Approving the general budget (passing the tables).
The financial and economic advisor to the Prime Minister, Mazhar Mohammed Saleh, had previously said 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, in sufficient and comfortable amounts at an exchange rate of 1320 dinars per dollar.”
Last year, Iraqi Foreign Minister Fuad Hussein said on a visit to Washington that his country had engaged in discussions in Washington with representatives of the US Treasury Department to address issues of dollar restriction.
Hussein described the meetings as “very useful,” noting that they will continue, and that topics scheduled for future discussions include further talks on the list of Iraqi banks subject to US sanctions and the status of Iranian funds accumulated in Iraq.
External factors that overthrew the Iraqi dinar
Iraq relies on oil revenues calculated in US dollars, so any changes in Washington’s economic policy towards the region could directly affect its cash reserves and its ability to stabilize the exchange rate.
Economic expert, Duraid Al-Anzi, says, “The rise in the price of the dollar in Iraq is not due to one reason, but rather is the result of several interconnected factors, the most prominent of which is the unstable monetary policies that the state has followed in recent months.”
Al-Anzi added, “The statements issued by the Central Bank of Iraq regarding the closure of the foreign currency sales window were a negative turning point that severely affected the stability of the exchange market, leading to wide-ranging repercussions on the Iraqi economy,” indicating that “closing the currency sales window caused a shake in confidence in the market, because it deprived the local market of an important source of providing dollars.”
This measure, according to Al-Anzi, led to an increase in demand for the dollar on the black market, at a time when the market was suffering from a lack of supply, which caused a significant and continuous increase in the exchange rate, adding, “As this gap continued, the price rose further, which led to confusion in the economy and aggravation of the crisis in general.”
Al-Anzi continued his talk by saying that there are external factors that contributed greatly to the pressure on the Iraqi dinar, the most prominent of which are:
First: The collapse of currencies in neighboring countries, where the Iranian (toman), Syrian (lira), and Lebanese (lira) currencies witnessed unprecedented collapses as a result of the economic and political crises in those countries, which directly affected the Iraqi economy. He pointed out that the collapse of these currencies made the Iraqi dinar appear relatively stronger compared to them, but at the same time it did not protect the Iraqi economy from being affected by regional changes.
Second: Political tensions in the region, as the escalation of political statements regarding events in the region contributed to increasing economic anxiety within Iraq, which made the dinar, which is already suffering from fragility without a strong backing, quickly affected by these variables.
Al-Anzi also said that “Iraq’s reliance on limited countries such as Turkey and the UAE in trade, given the relative stability of their currencies, has made the Iraqi economy pay a higher cost for imports compared to neighboring countries whose currencies are collapsing,” adding that “this trend has led to the loss of a major opportunity to achieve a trade balance with countries such as Iran, Syria and Lebanon, from which imports can be made for lower amounts if the price differences are taken advantage of.”
The International Monetary Fund had said earlier last year that “the imbalances in the financial system in Iraq have been exacerbated by the significant expansion in oil prices,” noting that “Iraq needs to correct public financial instruments and reduce the situation in the long term, preferably by building financial reserves.”
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