Iraqi Prime Minister and Kurdistan Region President discuss national issues and elections, 9 NOV
Thursday, November 9, 2023
Between speculation and smuggling...the rise in the dollar paralyzes the markets with an “imaginary recession” , 9 NOV
Between speculation and smuggling...the rise in the dollar paralyzes the markets with an “imaginary recession”
11/9/2023
The country’s foreign currency reserve is the largest in Iraq’s financial history, exceeding 100 billion dollars, and at the same time constitutes Iraq’s central reserve wallet, and most of the market demand to finance foreign exchanges for the private sector is done through those official reserves, which are offered by the monetary authority. , through its platform at the official exchange rate of 1,320 dinars per dollar.
This was reported by the Prime Minister’s Advisor for Financial Affairs, Mazhar Muhammad Saleh, who indicated a demand for cash dollars to finance commercial operations of very specific commodities, usually no more than five commodities.
Saleh explained during his talk to Shafaq News Agency, “Forces from within the market are trying to purchase it from outside the official commercial mechanisms, by resorting to obtaining cash dollars from the parallel market (a market that constitutes only 10 percent of the market’s need for foreign currency) to finance their trade.” ".
He stressed that these are “commercial actions that are not legally recognized by the financial, commercial and banking departments, and are carried out for many reasons, including tax or customs evasion or quality control.”
The Sudanese financial advisor continued by saying, “The main reason for controlling the parallel market is to combat illegal commercial activities above all else.”
Policy package
Saleh pointed out, “The state is currently undertaking a policy of defending economic stability, especially in providing sufficient commodity supply at always moderate prices, in two directions.”
The first, according to Saleh, is “providing additional supporting food and medicine baskets, construction baskets and high-demand spare parts, and purchasing them at the official stable exchange rate, through the cooperation mechanism between the state and the private sector.”
As for the second trend, it is “the monetary authority adopting new mechanisms, by providing liquid foreign currencies in addition to the dollar (and from a basket of various foreign currencies), to meet travel needs according to the traveler’s destination, especially for Hajj, Umrah, and tourism in its various aspects, and for various neighboring and distant countries.” According to Saleh.
He stated, “The aforementioned policy package aims to contain the noise made by foreign currency speculators in the parallel market, in order to profit at the expense of economic stability, and that the basic trends in economic policy are achieved by isolating the effects of the parallel or black market and the limitations of its illegal activities, from the stability of the system.” total price in the country.
Smuggling is organized for two reasons
For his part, the economic expert, Nabil Al-Marsoumi, considered that “what is happening is not a speculation operation with the black dollar in the parallel market and the cash dollar with the aim of making profits by taking advantage of price fluctuations, but rather an organized smuggling operation of the traveler’s dollar or the cash dollar, for two basic reasons.”
Al-Marsoumi stated to the agency, “The first reason is to pay for some goods imported from abroad, which are not included in the electronic platform, including (gold, drugs, alcoholic beverages, cigarettes).”
He pointed out that "some of these goods have a very large value, as Iraq imports cigarettes at about a billion dollars annually, while the value of alcoholic beverages is not less than a quarter of a billion dollars annually."
Regarding the second reason for dollar smuggling, the economic expert attributed it to “the strong demand for the dollar in the parallel market due to the need for the dollar in order to settle commercial exchanges, or Iraq’s imports of Iranian goods, which amount to 10 billion dollars annually.”
He added, "This is because Iran and Syria are also among the countries sanctioned by the United States, so commercial transactions cannot be settled with them through bank transfers. Therefore, the parallel market is resorted to, and the intense demand for a scarce dollar leads to higher prices."
Al-Marsoumi said, “The Central Bank will not be able, no matter what it does, to reduce the size of the gap between the official and parallel prices, as long as trade continues with the countries sanctioned by the United States, and as long as there is also a large segment of travelers to the sanctioned countries, especially Iran.”
He explained, "When travelers do not get the dollar at the official price, they resort to the dollar in the parallel market, and this increases its price," revealing that "Iraqi travelers demand about 3.5 billion dollars annually from the parallel market."
Al-Marsoumi concluded by saying, “All of these reasons have led and will lead to a widening of the gap between the parallel and official prices in the Iraqi market.”
'fake recession'
The rise of the dollar causes “stagnation of market movement, and the merchant stops making payments, buying and selling, despite the presence of a mass or liquidity of cash, and this is called (imaginary recession) as a result of the instability of the exchange rate,” according to the Vice President of the Baghdad Chamber of Commerce, Hassan Al-Sheikh.
As for the real economic stagnation, according to what Al-Sheikh saw to Shafaq News Agency, “it is based on the data of the lack of cash liquidity among the citizen, offset by large commodity dumping, in light of the lack of purchasing power. However, Iraq has strong financial capabilities, but the exchange rate is what Determines market movement.
He noted that "the government's printing of a monetary mass also affects the exchange rate, as whenever a large monetary mass is pumped into the market with no dollar available, the demand for the dollar will increase as it is considered a safe haven for the citizen's savings, and even for transactions," explaining that "the merchant is not a speculator." As some accuse him, he sells in dollars in order to maintain his capabilities.”
The Sheikh confirmed that several strategies were proposed as a matter of consultation to resolve this crisis, but the government did not take them up, calling for “working to create an attractive environment for investment, through stabilizing the exchange rate, so that the merchant and contractor feel that his money is safe and that he can invest within the country.” LINK
"RV UPDATE" BY FRANK26 & BRUCE, 9 NOV
Frank26
[Iraq boots-on-the-ground report]
FIREFLY: Television is saying the Central Bank of Iraq is allowing foreign countries and currencies to trade now inside of Iraq banks...
FIREFLY: Oil and Gas law by the 9th...or have to wait...Without the Oil and Gas no rate until 2024.
FRANK: You say, without the HCL you will not have an exchange rate until January 1st? I can agree with you to a certain point...IMO Between now and January 1 you will see what you want...They already gave you a clue - The dollar will stop on January 1st...
[Community Member Bank Story] I believe banking experiences are driven by the individual location and especially the training level of the bankers. I mentioned my investment to a baker at Chase yesterday, and she immediately dug out a "Private Client" business card, different than the one on her desk. She said "When that happens, call me."Bruce
[via WiserNow] ...you know this, this is ready to go and you know, I told you guys I wouldn't call it but this is probably as close as I've ever been...there's the only thing we were waiting for today right now is the okay by the military. To give to the Treasury they would have the green light to give to the redemption centers and banks...I'm excited about where we are...I think everything is set
The Intricate Dance of Governance: A Look at Prime Minister Sudani’s First Year in Office, 9 NOV
The Intricate Dance of Governance: A Look at Prime Minister Sudani’s First Year in Office, 9 NOV
Prime Minister Muhammad Shiaa Al-Sudani’s inaugural year has been a tableau of advancements and hurdles. His administration’s agenda, a blend of service-oriented goals and a political covenant between various factions, lacked explicit political objectives, possibly impeding his progress on key government priorities.
Economic Endeavors and Obstacles
Sudani’s approach to revamp the economy revolved around widening social welfare networks, generating government employment, and initiating short-term infrastructure projects. The budget earmarked for developmental investment was deemed inadequate, attracting criticism. The over-reliance on hydrocarbons and imports, amid a corrupt and bureaucratic atmosphere, presented substantial obstacles to long-term economic restructuring.
The Prime Minister vigorously courted foreign investment, clinching a multi-billion-dollar pact with TotalEnergies to bolster Iraq’s oil and gas sectors. Nevertheless, foreign interest in investing in other industries was lackluster due to deterrents such as red tape, corruption, and security apprehensions. The Iraqi dinar’s depreciation against the dollar added another layer of complexity to economic stability.
The Uphill Battle Against Corruption
While Sudani’s anti-corruption campaign led to certain convictions, it mostly targeted lower-tier officials. Powerful political entities and individuals embroiled in corruption continue to elude justice. The rampant corruption, especially in government contracts, mirrors a systemic issue eroding public confidence in the government’s capacity to address this widespread problem.
Foreign Policy Dynamics
Sudani endeavored to enhance economic and security bonds with Arab neighbors, including Jordan, Egypt, and the Gulf Cooperation Council (GCC) states, to diminish reliance on Iran. However, these endeavors faced resistance from specific Shia political parties and militias aligned with Iran. While Sudani aspired to uphold an independent and balanced foreign policy, he faced challenges due to conflicting interests and geopolitical dynamics.
Political Disarray and Militia Influence
Political divisions and discord impeded Sudani’s ability to meet the demands articulated in the political agreement that formed his government. Disputes over matters such as the oil and gas law, the return of internally displaced persons, and the deployment of paramilitary units underscored the complexities of governance in a deeply divided political landscape. Militias operating independently of the government’s authority further complicated security and political stability.
Continuing Security Threats
The intensification of attacks by Iranian-backed militias on U.S. forces in Iraq and Syria presented a significant security challenge. Sudani’s attempts to dissuade the militias from launching their attacks, and his appeal to Iranian officials for aid, underscored the complicated dynamics where the Prime Minister’s control over these groups was limited.
The intricate interplay of domestic, regional, and international dynamics has defined Sudani’s leadership tenure, highlighting the intricate nature of governance in Iraq. This comprehensive analysis provides a nuanced understanding of the complexities and intricacies of Iraq’s socio-political landscape.
Oil Output Increases at DNOs Kurdistan Fields, 9 NOV
Oil Output Increases at DNOs Kurdistan Fields
DNO has confirmed that production is increasing in its fields in Iraqi Kurdistan and has doubled in Q4 compared to Q3.
The Company stated that APIKUR members can produce oil for pipeline exports once payment terms are clarified.
In its third-quarter results on Thursday, it said:
After the Iraq-Türkiye Pipeline was closed in March, the Company slowly reopened the Tawke and Peshkabir fields. DNO, with 75 percent ownership, and Genel Energy International Ltd, with 25 percent ownership, increased deliveries to local trading companies in Kurdistan. Production is continuously growing; in the fourth quarter, the output has been twice as much as in the third quarter.
The contractual entitlement between DNO and Genel, which is currently around 50% of the volumes produced, is sold at prices with a narrow variation in the mid-USD 30s per barrel. Payments are made in advance before any oil is delivered.
DNO has recovered around USD 15 million over the past year, including USD 8 million in October, for the accumulated KRG debt to DNO for previous oil sales in 2022 and 2023 (more than USD 300 million):
According to the recent statement by the Prime Minister of Iraq, Baghdad, and Ankara are ready to resume the flows from Kurdistan as soon as certain unspecified agreements between the international oil companies and Iraq and Erbil are reached. However, the Association of the Petroleum Industry of Kurdistan (APIKUR), of which DNO is one of six members, has stated that the member companies cannot produce oil for pipeline exports until it becomes clear how they will be paid for their contractual entitlements of oil already sold and delivered for export and for future sales of such crude for export. APIKUR members are owed nearly USD 1 billion in overdue and unpaid arrears.
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