DINAR REVALUATION UPDATE: HOW IRAQ IS REDUCING THE INFLUENCE OF THE US DOLLAR IN THE LOCAL MARKET, 23 AUGUST

 Iraq's Economic Strategy to Lower the Dollar Exchange Rate in 2024

In the midst of a complex global financial landscape, Iraq has been implementing measures aimed at stabilizing its economy and reducing the influence of the US dollar in its local market. 

As of August 23, 2024, these efforts have been met with a degree of success, according to economic experts. 3 The Central Bank of Iraq's (CBI) measures to control the usage of foreign currencies have led to a stabilization of the dollar exchange rate, which had soared to an unprecedented 1,700 dinars per dollar before gradually declining to a range between 1,470 to 1,450 dinars per dollar.  3 These developments are significant in the context of Iraq's economic challenges and its efforts to diversify its economy and reduce dependency on oil revenues.  2

The Central Bank's Measures

The CBI's platform, designed to manage foreign currency requests specifically for financing foreign trade in the private sector, has played a critical role in controlling the dollar's exchange rate.  3 The platform's effectiveness has been evident in the stabilization of the dollar rate, despite fluctuations in demand. However, the budget increases have widened the gap, leading to higher total demand and consequently increasing pressure on the dollar.  3

Challenges and Solutions

The Iraqi government's decision to suspend the use of the Chinese yuan in foreign transactions, following accusations from the US Federal Reserve, has added to the complexity of the situation. 4 This move has been described as a "misstep" by economists, who warn that it could lead to an increase in the dollar exchange rate and inflation, negatively impacting Iraqi families. 4 In response, three potential solutions have been suggested for the CBI to maintain remittances to China: increasing assets in yuan through the Singaporean Development Bank, boosting assets in UAE dirhams, and negotiating for euro-denominated assets for trade with the EU. 4

The Broader Economic Context

Iraq's economy, heavily dependent on oil revenues, has faced significant challenges in recent years, including the impact of the COVID-19 pandemic and volatile oil prices.

 2 The country's efforts to diversify its economy and reduce its reliance on oil have been crucial in the face of these challenges. The World Bank has noted that Iraq's economy is gradually recovering from the shocks of 2020, with both oil and non-oil sectors showing growth. 2

Conclusion

Iraq's journey toward stabilizing its economy and reducing the influence of the US dollar is a multifaceted endeavor.

 While the CBI's measures have yielded some success, challenges such as budget increases and geopolitical tensions continue to impact the country's economic stability. 

The government's decision to halt yuan transactions and its impact on the dollar exchange rate highlight the delicate balance between domestic policy and international relations in shaping Iraq's economic future.

 As of August 23, 2024, Iraq's ongoing efforts to diversify its economy and stabilize its currency remain critical to its long-term economic health and resilience.

Economist points to a “solution” that will “lower” the dollar exchange rate, 23 AUGUST

 Economist points to a “solution” that will “lower” the dollar exchange rate

Today, Thursday (August 22, 2024), Mustafa Akram Hantoush, an expert in economic and financial affairs, commented on the reasons for the fluctuations in the dollar exchange rate in the Iraqi markets.

Hantoush told Baghdad Today, "The parallel market needs to be dismantled in order for the exchange rate to decrease. Previously, there were solutions to the issue of cigarettes and gold, and the tax was reduced and the merchant was allowed to buy through the platform again, and the exchange rate stabilized at 145 thousand dinars."

He added, "We have small traders who do not have a facilitating mechanism, and we have trades such as gold and cleaning materials that have not been processed, and we have huge trade with Iran and Syria worth millions of dollars, and these can be processed by giving them currency or gold," stressing that "most countries have solved the problem of trade with Iran, despite the American sanctions imposed on them, and solved the problem of travel to those countries."

The dollar exchange rate in the parallel markets rose again, as the markets recorded prices close to 150,000 dinars for every 100 dollars, even though the Central Bank of Iraq sells it at 1,320 dinars for every one dollar.

With the government's efforts to control prices in parallel markets, commercial markets witnessed a decline in the exchange rate in recent weeks, but it rose again, which indicates an economic problem that is still present in the country.

In response, parliamentarians raised a movement to question the governor of the Central Bank within the legislative dome, as the Finance Committee in the House of Representatives, on Sunday (August 4, 2024), directed a request to the Presidency of Parliament to question the governor of the Central Bank .

A document signed by the members of the Finance Committee, received by Baghdad Today, stated: “We, the members of the Finance Committee listed below, are the signatories for the purpose of hosting the Governor of the Central Bank due to a major defect in the management of the bank .”

The document added: "Therefore, we demand that the Governor of the Central Bank be questioned in the nearest session, in accordance with the applicable articles of the constitution and internal regulations."  link

BRUCE CALL HIGHLIGHTS, 23 AUGUST

 Thurs. 22 Aug. 2024 Bruce:

• There were 19 solid new currency rates showing up on Redemption Center screens. One was the USN.

• The screen rates at the Redemption Centers will be 3 x times higher on the Dinar and  2 x times higher on the Dong. The other currencies take the Bolivar are all between $4 and $7 so we’ll be fine.

• Emails to set redemption appointments were going out to the Redemption Center leaders. As of now they’ve not received the Green Light but they think after the markets close, or it could be by tomorrow through Sunday.

• Bond Holders are expecting their emails Sunday, Monday or Tuesday.

• So Tier4b (us, the Internet Group) could receive notification to make redemption appointments in conjunction with the EBS somewhere between the weekend to next Tuesday.

• We are hearing that over the weekend (or early next week) the EBS will alert us over our phones to turn on the TV for documentaries to be broadcast for eight hours three times a day for ten or twelve days of disclosure.

• The EBS and documentary showings were a cover for us to go in and do our exchanges and redemption of Zim.

• The Admiral will start either Saturday or Sunday and continue through Monday.

• All debt forgiveness will be done by the 31st August.

IRAQ'S BOLD MOVE: DINAR PEGGED TO A CURRENCY BASKET

DINAR REVALUATION UPDATE: Iraq Seeks Release of Funds from US Banks in August 2024, 23 AUGUST

Iraq Seeks Release of Funds from US Banks in August 2024

Iraq's efforts to regain control over its funds held in US banks have escalated in August 2024, reflecting a growing frustration with the limitations imposed by the United States on the use of Iraq's own financial resources. 2

Background: Iraq's Funds in US Banks

Since the end of sanctions, Iraq's oil revenues have been stored in an escrow fund managed by the US Treasury. This arrangement was initially intended to ensure the funds would be used for humanitarian purposes and to prevent any misuse by the Iraqi government.  1

Current Situation: Talks with US Treasury

Iraq is now engaged in talks with the US Treasury regarding its banks and the restrictions on dollar transactions. These negotiations are crucial as they aim to address the issues surrounding the use of Iraq's funds held in US banks. 2

Iraq's Motivation: Independence and Control

The Iraqi government is eager to gain full control over its financial resources, particularly as it is no longer subject to sanctions. The desire to manage its own funds stems from a wish to reduce dependency on US financial oversight and to use the money for domestic development and economic stability. 1

Challenges: Terrorist Financing Concerns

One significant hurdle in Iraq's quest for financial autonomy is the US Treasury's concerns over potential terrorist financing. An Iraqi bank, Al-Huda Bank, has been cited by the Treasury Department's Financial Crimes Enforcement Network (FinCEN) for its role in facilitating funds for foreign terrorist organizations, including Iran's Islamic Revolutionary Guard and its Quds Force, as well as Iran-aligned Iraqi militias.  3

Impact on Iraq-China Financial Transactions

In a related development, Iraq has been compelled to halt financial transactions in Chinese yuan under US pressure. The US Federal Reserve has directed Iraq to cease dealing in the Chinese currency, citing issues with some transfers. This directive has implications for Iraq's trade with China, which has been growing in recent years. 4

Conclusion: Iraq's Financial Autonomy

Iraq's push for the release of its funds from US banks in August 2024 is a clear indication of its desire to assert financial independence. The ongoing talks with the US Treasury, along with concerns over terrorist financing and restrictions on transactions in foreign currencies, underscore the complex challenges Iraq faces in its quest for control over its national wealth. 2 As of August 22, 2024, the outcome of these negotiations remains uncertain, with both sides working to find a mutually acceptable solution that addresses Iraq's financial autonomy while also safeguarding against illicit activities.

DINAR REVALUATION : ADOPT A "BASKET" OF CURRENCIES FOR THE NEW DINAR PEG TO STABILIZE AND DIVERSIFY IRAQ'S ECONOMY, 23 AUGUST

Iraq's Shift Towards a Currency Basket for Dinar Peg

In August 2024, Iraqi economics advisors are exerting pressure on the government to adopt a "basket" of currencies for the new dinar peg. 1 This move aligns with the International Monetary Fund's (IMF) plan from 2011, indicating a long-term strategy to stabilize and diversify Iraq's economy.

The IMF Plan and its Implications

The IMF's proposal to use a currency basket for the dinar peg aims to reduce Iraq's dependency on a single foreign currency, typically the US dollar, and to insulate the country from fluctuations in global oil prices. By linking the dinar to a basket of currencies, Iraq can achieve greater economic stability and reduce its vulnerability to external shocks. 1

Why a Currency Basket?

1. Diversification of Risks

A currency basket can include major currencies such as the US dollar, euro, Japanese yen, and Chinese renminbi. This diversification helps to spread risk and lower the impact of any single currency's volatility on Iraq's economy. 1

2. Enhanced Economic Stability

By pegging the dinar to a basket of currencies, Iraq can create a more stable economic environment. This stability is crucial for attracting foreign investment and promoting business confidence, both of which are essential for economic growth.  2

3. Encouraging Economic Diversification

A diversified currency peg can incentivize Iraq to move away from its heavy reliance on oil revenues. By stabilizing the dinar, the government can foster a more conducive environment for non-oil sectors, encouraging diversification and reducing the country's exposure to oil price volatility. 1

Challenges and Considerations

1. Political and Economic Factors

The transition to a currency basket will require careful planning and coordination among Iraq's central bank, government, and international financial institutions. Political stability and economic conditions will play critical roles in the success of such a move. 2

2. International Relations

Iraq will need to consider its relationships with countries whose currencies are included in the basket. This could influence diplomatic and trade relations, requiring a nuanced approach to balance economic benefits with geopolitical considerations.

3. Implementation Strategies

The government must develop a clear roadmap for implementing the currency basket, including technical adjustments, public education, and measures to mitigate any short-term economic disruptions. 1

Conclusion

The shift towards a currency basket for the new dinar peg represents a strategic move by Iraq to stabilize its economy and reduce its reliance on oil revenues. While challenges remain, the potential benefits of enhanced economic stability and diversification make this a significant step forward for Iraq's long-term economic health. 2

LATEST FROM FRANK26, 23 AUGUST

 Frank26 

 The goal is what?  Retrieve those [Three zero notes].  

How? 

As soon as we raise the value, give them purchasing power, as soon as we drop the 3 zeros, they're going to bring in all that 80 something percent [still in Iraqi mattresses]...The monetary reform plan is brilliant...It is moving at a very fast pace.

DINAR REVALUATION 

ANALYSIS OF WHAT EDDIE TOLD TO FRANK26: 

" Then Saleh talking about oil being sold in dinars instead of dollars." 

 Economist back on tv saying it’s time to drop the zeros."

---It sounds like there's a couple of interesting economic discussions happening in Iraq right now!

1. Saleh and Oil Sales in Dinars: Saleh's suggestion to sell oil in dinars instead of dollars could be aimed at strengthening the Iraqi dinar and reducing dependence on the US dollar. This move could potentially stabilize the local economy and improve national financial sovereignty. However, it would also require significant adjustments in international trade agreements and currency exchange systems.

2. Dropping Zeros from the Dinar: The economist's call to drop zeros from the dinar is a common monetary policy strategy known as "currency redenomination." This involves introducing a new unit of currency that is worth a thousand or more times the old unit. It's often done to simplify transactions and improve the currency’s image after periods of high inflation or economic instability. For Iraq, this could be a step towards stabilizing the currency and restoring confidence in its value.

Both of these measures reflect efforts to address economic challenges and enhance the stability of Iraq's financial system. The success of these strategies will depend on how they are implemented and their impact on the broader economy.

SEEMS THAT WE ARE REALLY CLOSE TO OUR DESIRED RV!!!

https://dinarevaluation.blogspot.com/2024/08/dinar-revaluation-update-seems-that-we.html