Friday, October 6, 2023
Decoding Iraq’s Currency Crisis: De-dollarization, Exchange Rates, and Economic Ramifications, 6 OCT
Decoding Iraq’s Currency Crisis: De-dollarization, Exchange Rates, and Economic Ramifications
Unveiling the Currency Conundrum
The recent statement from a top Iraqi official denying the speculation that the exchange rate would reach 1700 has added another intriguing layer to Iraq’s complex economic narrative. This announcement diverges from earlier predictions, shedding new light on the nation’s currency exchange dynamics. To appreciate the full implications of this revelation, it is essential to delve into the history of Iraq’s currency situation, the current impacts on stakeholders, and potential future ramifications.
Historical Overview: A Turbulent Economic Journey
The landscape of Iraq’s economy has been dramatically shaped by its tumultuous history. The country has witnessed recurring wars, crippling sanctions, and political crises, all of which have left indelible marks on its monetary system. The 2003 U.S. invasion was a particularly pivotal moment, marking a shift towards a dollar-dominated economy. Despite the country’s rich oil reserves, the Iraqi dinar’s value plummeted, leading to a preference for the U.S. dollar among the population.
Fast forward to 2024, the Central Bank of Iraq (CBI) is set to implement a ban on cash withdrawals and transactions in U.S. dollars. This move is part of a broader strategy to curb financial crimes and the evasion of U.S. sanctions on Iran. The director-general of investment and remittances at the CBI, Mazen Ahmed, has stated that this measure will stamp out the illicit use of approximately 50% of the $10 billion that Iraq imports in cash from the New York Federal Reserve each year.
Understanding the Present: The Currency Crisis Unfolds
Despite the official exchange rate of 1,320 dinars to the dollar, the parallel market rate recently sat at 1,560, a discrepancy of roughly 15%. This disparity has stirred much speculation, with some predicting that the exchange rate would escalate to 1700. However, the recent denial by the Iraqi official provides a fresh perspective, contradicting these predictions.
Amidst the chaos, there are visible signs of frustration. Social media witnessed a surge of outrage, with videos circulating of a depositor threatening to burn down a Baghdad bank if he was not given his deposit in cash dollars. This incident echoes the desperate actions taken by depositors during Lebanon’s banking crisis, underscoring the severity of the situation.
Peering into the Future: Implications and Ramifications
While the immediate impacts of this currency crisis are apparent, the future ramifications are less clear-cut. The move towards de-dollarizing the economy could result in the dinar losing more value, according to Ahmed. However, he also asserts that this is an acceptable side-effect of formalizing the financial system. He contends that this will only affect those engaged in illegitimate transactions, as the CBI continues to provide dollars at the official rate for legitimate purposes.
These measures could potentially reshape Iraq’s economic landscape, influencing stakeholders ranging from everyday citizens to international investors. However, the road to economic stability is fraught with challenges. While the Iraqi government’s commitment to combating financial crimes and sanction evasion is commendable, the unfolding currency crisis serves as a stark reminder of the country’s fragile economic state.
"RV UPDATE" BY SANDY INGRAM & CLARE, 6 OCT
Sandy
Article: "Iraq to end all dollar cash withdrawals by Jan. 1 2024 -C.bank official"
Breaking news...Iraq will bank cash withdrawals and transactions in US dollars as of January 1 2024 in the latest push to curb the misuse of hard currency reserves in financial crimes and the evasion of US sanctions on Iraq....
This move aims to stamp out the illicit use of some 50% of the 10 billion US dollars that Iraq imports in cash from New York Federal reserve each year...guys this is major.
Article: "Iraq ReceivesIts Second Boeing 787 Dreamliner" Iraq has taken possession of its
second Boeing 787 Dreamliner aircraft. This is the second of 10
airplanes Iraq has ordered.
travel in the Middle East will increase by more than 40% in the coming
years.
"A Call For An Emergency Plan"... The Dollar In Iraq Is Entering A Dangerous Turning Point And An Unprecedented American Decision, 6 OCT
"A Call For An Emergency Plan"... The Dollar In Iraq Is Entering A Dangerous Turning Point And An Unprecedented American Decision
Baghdad Today – Baghdad Professor of International Economics, Nawar Al-Saadi, said on Thursday (October 5, 2023), that the US Federal Bank refused to provide the Iraqi Central Bank with one billion dollars in cash, “a dangerous precedent that must be taken seriously by the Iraqi government.”
Al-Saadi said in a post on his Facebook page, “Enough of the drumming by the economists who drum on the channels day and night and claim that the dinar is strong and that there are strict measures.”
He added, "Now the trust between the Iraqi Central Bank and the (American) Federal Reserve has deteriorated. The Americans cannot tolerate procrastination and prevarication any longer."
Al-Saadi stressed, "An emergency plan and comprehensive reforms must now be announced in cooperation with the Ministry of Interior to control speculators in the market, control borders, and prevent currency smuggling, otherwise undesirable consequences will happen."
"A call for an emergency plan"... The dollar in Iraq is entering a dangerous turning point PIC
One of the advisors to the government of Muhammad Shiaa Al-Sudani had previously revealed that “the United States of America warned the Sudanese government eight times, publicly and clearly, against the continued sale of the dollar in large quantities through the currency auction window of the Central Bank.”
He said that the American side "has provided ample evidence that the majority of buyers of the dollar are smuggling it to Iran, Syria and Lebanon," explaining that "this sale led to the monopoly of the dollar among merchants, and a decline in its presence in local and private banks."
Last February, the Central Bank of Iraq decided to raise the value of the official exchange rate of the dinar against the dollar by 10 percent in a measure aimed at reducing the devaluation of the currency that accompanied the adoption of more stringent regulations regarding financial transfers outside the country.
The government then agreed to the Central Bank’s proposal to raise the value of the exchange rate from about 1,470 dinars to 1,300 dinars per dollar, which had a clear impact on the exchange market at that time by reducing prices that reached the level of 1,700 dinars in the parallel market.
For several months, the value of the Iraqi dinar has fluctuated sharply, losing on some days 15 percent of its value against the dollar, which sparked sporadic demonstrations by Iraqis worried about losing their purchasing power.
What made things even more unclear was after Reuters quoted the Director General of the Investment and Transfer Department at the Central Bank of Iraq, Mazen Ahmed, as saying that Iraq would ban cash withdrawals and transactions in US dollars starting from the beginning of next year and not immediately, a step that was interpreted by some experts as a “delay.” “For depositors if they want to withdraw their money.
However, the central bank official quickly issued a clarification regarding his statements to Reuters, saying that they “included inaccurate journalistic formulations.”
He said in a statement published on the Central Bank of Iraq's Facebook page, "The Central Bank guarantees dollar deposits, and the citizen who deposited his money in dollars with any Iraqi bank previously or by 2024 has an inherent right to receive these amounts in cash and in dollars."
He pointed out that the date of next January 1 “will be the beginning of stopping cash withdrawals for incoming remittances only from outside Iraq, according to certain arrangements that guarantee the sustainability of business and does not in any way include citizens’ balances in dollars.”
Independent MP in Parliament Hadi Al-Salami says, “The current failure in the dollar issue is borne by all the Iraqi governments that have ruled the country since 2003 until now. The government of Muhammad Shiaa Al-Sudani pledged to solve the crisis by establishing mechanisms to prevent the smuggling of hard currency, but it did not succeed in doing so.” This file."
He pointed out, "Reforming the banking system and the dollar crisis requires controlling the currency auction, which is still selling large amounts of dollars, and we do not know where it is going," noting that "the problem is big in Iraq, and we are facing huge challenges that may lead to a crack in the current system." Especially since the United States of America has warned many against smuggling the dollar to neighboring countries.” Source: Baghdad Al-Youm + Agencies LINK
The Dollar Crisis Is Worsening In Iraq: Quarrels Within Private Banks, 6 OCT
The Dollar Crisis Is Worsening In Iraq: Quarrels Within Private Banks
Posted On2023-10-06 By Sotaliraq Iraqis who have accounts in private banks complain of the inability to receive their money transfers that reach them from abroad in hard currency, even though they have contracts for their salaries, official books, and documents related to their companies and interests, while banks refrain from delivering dollars to Iraqis under the pretext of a government decision prohibiting the circulation of the dollar and dealing in the dinar.
Iraqi only, what observers consider the beginning of an economic crisis and a new global isolation for Iraq.
The Iraqi Council of Ministers issued a decision, last April, obligating all companies and banks to use the dinar only in their transactions, including the salaries of employees of foreign companies, which were in dollars and paid in dinars, and the official rate is 1,320 dinars, with the exception of diplomatic missions, which are paid in dollars, and in turn the bank The Iraqi Central Bank circulated this decision to the Iraqi banks to adhere to it, which implemented the decision and forced companies to receive all their incoming transfers in dinars and at the official rate, knowing that the exchange rate of the dollar in the markets is close to 1,600 Iraqi dinars.
Representative and member of the “Al-Basas” coalition, Hussein Arab, published a video clip on his account on the “X” platform (formerly Twitter), showing Iraqis angry that they had not received sums of money allocated to them in dollars, but the banks were refraining from giving them dollars.
He wrote: “The acquisition by a non-local private bank of the amounts of financial transfers via the electronic dollar platform, estimated at 70% of Iraq’s transfers, is abnormal and disastrous. We will have a clear position on manipulating the fate of the country’s economy. We will not remain silent.”
For his part, the independent representative in the Iraqi parliament, Hadi Al-Salami, said, “The current failure in the US dollar issue is borne by all the Iraqi governments that have ruled the country since 2003 until now, and the government of Muhammad Shiaa Al-Sudani has pledged to solve the crisis by establishing mechanisms to prevent currency smuggling.” It was difficult, but it did not succeed in this file.”
Al-Salami added, in an interview with Al-Araby Al-Jadeed, that “reforming the banking system and the dollar crisis requires controlling the currency auction, which is still selling large quantities of dollars, and we do not know where it goes,” noting that “the problem is big in Iraq, and we are facing challenges.” Huge amounts that may lead to a crack in the current system, especially since the United States of America has often warned against smuggling the dollar to neighboring countries.”
According to an advisor to the Sudanese government, “The United States of America warned the Sudanese government eight times, publicly and clearly, against the continued sale of the dollar in large quantities through the currency auction window of the Central Bank, and it provided ample evidence that the majority of buyers of the dollar are smuggling it to Iran, Syria, and Lebanon.”
He explained to Al-Araby Al-Jadeed that “this sale led to the monopoly of the dollar among merchants, and its presence in local and private banks declined.”
Reuters also quoted the Director General of Investment and Transfers at the Central Bank of Iraq, Mazen Ahmed, as saying that “Iraq will ban cash withdrawals and transactions in US dollars as of January 2024,” considering that “the ban is the latest campaign to limit the misuse of Iraq’s currency reserves.” Hard currency in financial crimes and evading US sanctions on Iran.”
But the researcher in economic affairs in Iraq, Wissam al-Jubouri, pointed out that “the government’s continued failure to deal with the dollar file, and depriving Iraqis of receiving their salaries and managing their economic and commercial affairs, is pushing them to leave Iraq, and will lead to discouraging financial transfers from abroad in the future.” .
He confirmed to Al-Araby Al-Jadeed that “all recent government decisions are in line with smugglers, and do not serve the Iraqi economy. Rather, they lead to weak financial dealings between Iraq and the countries of the region and the world.”
Earlier, American officials confirmed that Washington had imposed sanctions on 14 Iraqi banks by preventing them from conducting transactions in dollars, as part of a comprehensive campaign to combat the leakage of American currency to Iran, considering that banks and exchange companies were able to achieve huge profits from their transactions in dollars, through the use of operations. Fraudulent import.
The US sanctions included the banks “Al-Mashashar, Al-Qartas, Al-Tayef, Elaf, and Erbil, in addition to the International Islamic Bank, Trans-Iraq Bank, Mosul, Al-Rajeh, Sumer, Al-Thiqah, Or, Al-Tayef, Al-Alam, and Zain Iraq,” and according to Iraqi sources, these banks are affiliated with religious parties, militias, and armed factions loyal to Iran.
Over the past years, an average of $170 million was sold daily through what is known as the dollar auction, in which merchants, banks, and companies participate, without monitoring the end of that money, which is classified as import trade for the local market in most cases, or foreign transfers, knowing that The actual need for dollars in the markets and among merchants does not exceed $50 million per day, according to experts. LINK
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