Monetary And Financial Measures To Control The Market And Protect The Iraqi Dinar
Baghdad: Shukran Al-Fatlawi Saja Al-Gharawi
Iraqi Dinar blog
As part of the government’s efforts to regulate the market and enhance monetary stability, the relevant financial institutions continue to implement a package of integrated policies aimed at protecting the exchange rate of the Iraqi dinar and reducing the impact of emerging changes on the national economy, especially with regard to the price gap between the official and unofficial markets for foreign currencies.
For the past two days, Iraqi markets have witnessed fluctuations in the exchange rate of the US dollar, which has exceeded 150,000 dinars.
Jassim Al-Aradi, a member of the Baghdad Economic Forum, said that the recent increases in exchange rates within the local markets came as a result of the overlap of a group of factors, most notably the application of the “Askoda” system, which prompted some traders to look for quick alternatives to secure the requirements of their foreign trade.
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Procedural Paths
He added to “Al-Sabah” that some traders turned to the parallel market to obtain dollars, due to the delays or procedural paths that accompanied the first stages of implementing the system, which led to an increase in the unregulated demand for foreign currency, and directly affected the movement of the market and price levels.
Real Demand
Al-Aradi stated that the Central Bank of Iraq continues to play its role in meeting the real demand for dollars for foreign trade purposes, through official channels, and in accordance with compliance controls and international standards.
He pointed out that addressing these increases requires giving the market a period of time.
Sufficient to adapt to the new mechanisms, along with simplifying procedures and intensifying coordination between the concerned parties, which contributes to reducing recourse to the parallel market, restoring balance to the exchange market, and maintaining the stability of the dinar and the confidence of dealers in the adopted monetary policies.
The Prime Minister’s financial advisor, Dr. Mazhar Muhammad Saleh, told Al-Sabah: “Reducing the gap between the official exchange rate in the organized market and its counterpart in the unorganized market is not a single monetary decision, but rather a conscious coordination between fiscal and monetary policy, supported by financial reforms that contribute to strengthening confidence and reducing risks.”
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Economic Behavior
Saleh pointed out that this coordination aims to redirect economic behavior from hedging and speculation to stability, through the continuation of financial and trade policies and in full cooperation with the Central Bank of Iraq, in a way that enhances monetary stability and preserves the purchasing power of the citizen.
He stressed that controlling public spending and directing it towards development priorities, along with regulating the demand for foreign currency through official banking channels, represent two fundamental pillars in reducing the artificial pressures on the parallel market and narrowing the gap between the official and parallel prices, in line with the objectives of monetary stability stipulated in the Central Bank of Iraq Law No. (56) of 2004.
Boosting Confidence In The Dinar
Saleh explained that the monetary authorities' continued adoption of a policy to defend the exchange rate, supported by strong foreign reserves, in conjunction with liquidity management and bolstering confidence in the national currency, has contributed to maintaining stable prices for basic commodities and citizens' living standards within safe inflation ranges.
He pointed out that these measures are part of a broader reform path aimed at enhancing the transparency of public finances, improving compliance with the global financial system, and supporting the resilience of the banking sector, thereby consolidating economic stability and strengthening the confidence of citizens and stakeholders in the national economy.
Market Regulation
For his part, economist Ziad al-Hashemi told Al-Sabah that regulatory and control measures in local markets directly contribute to reducing speculation, which in turn reduces artificial demand for dollars in the parallel market, even if it doesn't eliminate it entirely. Al-Hashemi explained that factors contributing to high exchange rates remain, especially with the implementation of new systems such as the unified customs system (ASYCUDA), which was accompanied by uncontrolled demand for dollars, leading to additional pressure on the exchange rate in the recent period.
Cash Reserve
For his part, Dr. Sadiq Al-Rikabi, Director of Economic Research at the Global Center for Development Studies in the United Kingdom, pointed out that the Central Bank of Iraq's reserves represent the first line of defense for the dinar. He explained that the reserves' ability to meet the demand for dollars during any significant increases contributes to strengthening public and commercial confidence in the national currency.
Al-Rikabi also addressed the issue of inflation, clarifying that the rise in prices is not related to monetary inflation, but rather to structural inflation stemming from Iraq's heavy reliance on imports to meet its needs. This creates a continuous demand for dollars and affects the exchange rate. https://alsabaah.iq/127173-.html