Parliamentary Finance: Three challenges surrounding the parallel market
On Monday, Representative Mudar Al-Karawi, a member of the Parliamentary Finance Committee, identified three challenges related to the parallel market in Iraq.
Al-Karawi stated that the decrease in the US dollar exchange rate in the parallel market was anticipated for three months due to the Central Bank’s measures. He highlighted three challenges that require attention, which include the balance of imports, smuggling, and speculation. Additionally, corruption is attempting to hinder any reforms in the financial sector.
Al-Karawi stated that the decrease in the black market exchange rate could be temporary, and a sudden increase may occur soon. This is because Iraq heavily relies on foreign imports for 90% of its needs, which requires hard currency and puts a strain on the market. As a result, there might be a slowdown in the decline of the central bank rate.
He emphasized that if the Iraqi industry does not receive a dose of hope, by achieving flexible production rates and meeting market demand in a way that reduces imports, the parallel market will continue to be under pressure. He stressed the need to diversify the basket of currencies and not limit it to the US dollar.
The country’s black market has seen a 5% drop in recent weeks, with expectations of a further decline to 145,000 dinars per $100 by the end of January.
An economic expert confirms the possibility of following the movement of the dinar
On Sunday, economic expert Safwan Qusay confirmed the possibility of Iraqi banks to follow the movement of the dinar and buyers of goods and merchandise from abroad, through new electronic cards and the shift towards the digital economy.
(They said digital economy not digital currency tokens.)
Qusay told Al-Maalouma, “Iraqi banks can move towards monitoring the movement of the dinar through banking and governmental measures that push towards a shift towards working with electronic cards.”
He added, “The government’s tendency is to shift from storing money in homes to putting it in banks via electronic cards, and thus investing the dinar after it is with the banks so that it can be redisbursed in the form of projects and job opportunities.” “
He stated that “banks will have the opportunity to track the dinar and know buyers of goods from abroad, as the current government seeks to transfer the economy and turn it into a digital economy and attract more investments, as well as achieving economic security and controlling the movement of hard currency and the dinar at the same time.”
The Iraqi dinar recovered against the dollar amid government measures to confront speculators, 27 DEC
On Tuesday, the Iraqi dinar gained against the dollar at the currency exchange in Baghdad. This is because the Iraqi government and monetary authorities are taking measures to combat the parallel market and punish currency speculators.
Today, on Tuesday, the Al-Kifah and Al-Harithiya Stock Exchanges in Baghdad, along with the Erbil Stock Exchange, witnessed a rise in the value of the Iraqi dinar as compared to the dollar. The dinar’s value increased by 1,490 dinars to one dollar, which is the highest it has been in more than eight months. However, it still remains quite far from the official value set by the Central Bank of Iraq, which is 1,320 dinars per dollar.
According to experts, the dinar’s exchange rate is expected to increase against the dollar due to several reasons gradually. One of the main factors is the recent agreement between the Iraqi Central Bank and the US Federal Reserve. This agreement aims to transfer operations gradually to enhance the advance balance of the dollar in the accounts of a number of Iraqi banks.
In addition to imports from countries sanctioned by the US, such as Iran, Syria, and Lebanon, the Iraqi market now has standard financial systems that reduce demand for the dollar.
While some believe that trade exchange operations stagnate and deals temporarily cease at the end of each year due to the holiday season, others disagree.
The topic is “The recovery of the Iraqi dinar.”
Economic expert Abdul Rahman Al-Sheikhli has predicted that the exchange rate in Iraq may drop to 1,450 dinars per dollar in the near future due to current intervention methods.
During an interview with Al-Arabi Al-Jadeed, Al-Sheikhli explained that the value of the dollar may decrease if Iraq diversifies its sources of income. This could be achieved through the development of industry, agriculture, trade, and investment in other areas of wealth.
He emphasized that by investing in modern and advanced methods in management, work, industry, and agriculture, the rate of imports from abroad can be reduced. This will lead to the recovery of the national economy, which in turn will have a positive impact on the gross domestic product of Iraq.
Jamal Kujar, a member of the Finance Committee in the Iraqi Parliament, confirmed that the decrease in the dollar exchange rate is not inevitable.
During an interview with Al-Araby Al-Jadeed, Cougar clarified that the recent decline in the exchange rate is due to a decrease in demand for it in commercial and financial exchange operations. This is mainly because countries are celebrating the New Year.
According to him, the Iraqi financial market is dominated by a group of speculators who dictate prices based on the demands of their work in the market. He emphasized that the Iraqi government has no control over these speculators.
Koger noted that Iraq’s economic and financial structure is facing a fundamental issue, which is the imbalance resulting from its heavy reliance on oil exports. This has led to a dollar crisis, as the country needs dollars to cover its foreign expenses while remaining heavily dependent on imports due to the lack of effective national production.
Ali Jassim Al-Hayani, an economic researcher, predicts that although there may be an increase in demand for the US dollar by the end of 2023 due to a significant number of Iraqis traveling abroad for the end-of-year vacation and the halt of commercial activities, the exchange rate may still decrease significantly if the Iraqi government implements strict measures against speculators.
During an interview with Al-Arabi Al-Jadeed, he stated that the decline was due to the reduction in black transfers following Iraq’s recent agreement to finance foreign trade using non-dollar means, particularly with Turkey.
“He cautioned against using money laundering networks and influential parties to gain direct control of the dollar in the market after a decrease in prices. He called on the government to implement economic security measures and enforce them in the market to prevent fraud and price manipulation.”
Government actions
Hisham Al-Rikabi, the Media Advisor to the Presidency of the Government, has announced that the Iraqi government is taking serious measures to address the issue of the dollar shortage. The government is implementing several legal and administrative measures to combat currency smuggling operations and to prevent manipulation of the exchange rate.
According to a press statement by Al-Rikabi, the government’s battle with the dollar is almost over and its financial system reform measures have strengthened confidence between Baghdad and Washington.
“He mentioned that the Iraqi government’s efforts to reform financial institutions and improve monetary systems were crucial and effective in restoring balance and building trust between Iraq and the United States. These efforts have resulted in positive steps towards achieving success in the Iraqi banking sector.”
He mentioned that the currency market is expected to undergo a significant change in the upcoming days. This is due to the government’s actions and instructions to the Central Bank to take decisive measures to tackle the issues of manipulation and smuggling.
The US Ambassador to Iraq, Alina Romanowski, said last Sunday that her country continues to provide dollar services to Iraq in the interest of economic stability.
On her account on the “X” platform, she stated that many Iraqi banks have established relationships with international banks. She described this as a positive step towards reforming the Iraqi banking sector.
I'm not saying the rate is going to change the 1st of January but things going to be stronger, a lot stronger. Once they start using the dinar they're going to be a lot stronger...
Article quote: "Salih the financial advisor to the Prime Minister confirmed that the dollar exchange rates in the parallel market began to approach the official price set at 1320 per dollar after recent measures taken by the central bank and the Iraqi government..."
That's what's slowing down all this process. It's people still using the dollar in Iraq. Even me, I use the dollar in Iraq. When I was there last week I use a dollar in Iraq. Why? Because it's a lot easier. It's smaller. You don't carry a lot. You carry $500, $600, $700 with you, $1000 max...If I didn't have the dollar and If the dinar for me to carry...it would be a lot in my pockets..
The facts are the facts. If they delete the dollar, if they take off the dollar from the markets in Iraq, they're going to have to come out with a small category of dinar. That's it. Why? Because it's too much dinars to carry...I'm not going to cary 150,000 dinars in my pockets. I'm not going to do that. I prefer to have $100 than 150,000.
Everybody's asking me what's going on. What's the news. The news, you will see it on the 1st of January - what exactly is going on. They already gave you a date. I told you the 1st of January we'll be out of the dollar. We will not work with the dollar anymore in Iraq.
Everybody's asking me what's going on. What's the news. The news, you will see it on the 1st of January - what exactly is going on. They already gave you a date. I told you the 1st of January we'll be out of the dollar. We will not work with the dollar anymore in Iraq.
A Deficit Of 39 Billion Dollars.. A Specialist Comments On International Reports That Warned Of The “Collapse Of The Iraqi Economy”
Economy |12-23-2023, Baghdad today – Baghdad Today, Saturday (December 23, 2023), economic expert Manar Al-Obaidi commented on the international reports issued by the International Monetary Fund and the World Bank regarding the Iraqi economy.
Al-Obaidi told “Baghdad Today” that “there is ambiguity in the reports issued about the Iraqi economy, and there is a statement from the International Monetary Fund that was not positive, but rather wanted to formulate the matter in a diplomatic way that is more positive.”
He added, "The second report was issued by the World Bank, which is an extensive report that talked about the various aspects of the Iraqi economy, pointed out its shortcomings, and mentioned some important information that if it is not taken seriously by the government, we will be facing a major and difficult challenge that may lead to the complete collapse of the Iraqi economy."
The expert in economic affairs stated, “The World Bank report stated that if Iraq wants to spend all sections of the 2024 budget, the average selling price of a barrel of Iraqi oil must not be less than 112 dollars, but if the current price rates continue, it will lead to a deficit of 39 dollars.”
One billion dollars will be covered from the reserves achieved from previous years in which Iraq achieved a surplus, specifically in 2022 and 2023.”
Earlier today, Saturday (December 23, 2023), economic expert Nabil Al-Marsoumi summarized 7 risks facing Iraq that came in the latest report of the International Monetary Fund.
Al-Marsoumi said in a clarification received by “Baghdad Today” that
“despite the positive signals included in the report of the International Monetary Fund experts after their visit to Iraq on December 19, 2023, which included a recovery in economic activity in Iraq and a decline in inflation rates, the report indicated in detail some risks.” Challenging the Iraqi economy.
He explained that the most important of these risks are:
First: The significant expansion of public finances within the framework of the effective three-year budget law imposes significant and important risks on the sustainability of the public finances and the external sector in the medium term.
Second: Exercising caution in public financial conditions and implementing structural reforms are considered extremely important factors in ensuring the protection of macroeconomic stability and sustainability, and achieving lasting and more comprehensive growth.
Third: The decline in oil production after the closure of the oil pipeline linking Iraq and Turkey, and the reduction in production at the request of the OPEC+ group, will work together to reduce the growth of the gross domestic product in the years 2023 and 2024.
Fourth: The public finance balance is expected to transform from a large surplus achieved in 2022 to a budget deficit in 2023. Experts expect the size of the government’s fiscal deficit to expand further in 2024, reflecting the full annual impact of budget measures.
Fifth: The significant expansion of public finances, including a fundamental increase in the numbers of members of the public sector and retirement, creates permanent requirements for public spending that will put pressure on public funds in the medium term.
Sixth: Mobilizing more non-oil revenues, containing the wage bill for government employees, and reforming the government retirement system. These measures must be supported by a move to a more targeted social safety net that works to provide better protection for vulnerable groups.
Seventh: The necessity of creating equal opportunities for the private sector by implementing reforms in banking and the electricity sector, reducing distortions in the labor market, and continuing to make efforts aimed at strengthening governance and reducing the spread of corruption.
