MNT GOAT
Many of my blog readers ask me: Why didn’t Iraq just take the needed steps right from the very beginning in January 2023 to put together foreign currency swap deals with other countries to pay for imports.
This way they wouldn’t have had to take an entire year to combat the parallel dollar market. To answer this question I must go a bit deep. I hope you don’t mind because I know many of you have limited attention spans.
I will tell you why. It is because since the sanctions, the US has held a strong grip on their economy and remember they still have to authorize the dollar shipments to Iraq to satisfy the demand for the dollar. This is like “blackmail” to get Iraq to go along with them even though they are now out of sanctions. So, in 2022 the US Treasury contracted with a software developer firm to build the “electronic platform”. This new platform was rolled out in January 2023 to audit and monitor the currency auctions. This was the start of serious de-dollarization. But who initiated it? Was it the US or Iraq. It was the U.S. and so Iraq has to follow the lead and cooperate this effort and move at the pace suggested by the US Treasury, who was there to help in the process.
Of course, this process of obtaining dollars is now being moved away from the CBI requesting them from the US Treasury to the private banks requesting dollars through inter-banking practices, as other non-sanctioned countries traditionally already operate under. This is all so very good!
I also need to point out, as told to us in one of the recent articles in today’s news, is that the government did not spend the budget in 2023 so that it would not be exploited in the local elections by parties and candidates at the time. In 2024 Iraq is calling on the government to start spending the budget more than it was spending in 2023 in order to be a facilitating factor for the market and exchange rate to stabilize.
So, there are many forces working against the parallel black market and will only help to stabilize the dinar official rate yet more. These forces will prevent not only large fluctuations of the dinar against the official CBI rate but also to bring the rate to a stable point to the official CBI rate. I will recap these points of these many factors they are now using:
1.Emphasising the dinar as the “National Currency” and will be the only currency used in country. There will be only one currency in Iraq and it is the Iraqi dinar;
2.Banks allowed now to import cash blocks of foreign currencies;
3.In addition to the recent measures and the consensus with the US Federal to agree to deal with the Turkey lira, UAE dirham, the euro, the Chinese yuan and the Indian ruppe, all contribute to reducing the exchange rate.”
4.We are told the dollar exchange rate will stabilize with the broader launch of the budget in 2024;
5.Banks will be forced to support the industrial initiative, which will gradually work on some industries to become their production internally to reduce the demand for the dollar as they produce in country goods for foreign trade.
6. Iraq must deal with a “basket of currencies” in addition to the dollar gradually so that it is not governed by federal instructions in addition to reducing imports.
See #3 and 6: I believe this is not “the basket” of currencies I talked about many times already to re-peg with the dinar when it goes live on FOREX. These currencies are just temporary pseudo-pegs like currencies being used to gradually get off the dollar more and more when dealing in trade with other countries. So, there is yet another major step to take to get where they need to go globally and that too is coming. Remember “first things first”!
So, we can see what is slowly happening is that Iraq is moving back to a normalcy of their financial system an international normalcy. It takes much more than just putting in place the banking reforms, the means and the mechanisms to do it as we have witnessed over the past years. But now they are actually doing it. It may be slow but remember they are still under the strong arm of the US Treasury on this matter too and are working very closely with them at their pace. In many ways this is good as we want the US to support this process when it comes time to give the “green light”. This is why so many visits by the US Treasury to Iraq, Get it?
https://dinarevaluation.blogspot.com/2023/12/status-of-rv-by-mnt-goat-28-dec.html
