Once the parallel market is matched or close to the “official” CBI rate the next phase of the process that we have been waiting for now for over a year can happen.
That phase is an in-country rate change at or just over a dollar.
Next the currency switch-out to the newer lower denominations can begin.
This was Dr Shabibi’s plan all along since its inception in 2011.
He nearly executed it too in 2012-2013.
After the currency switch out and period to monitor for inflationary reactions with new rate, the move to reinstate the dinar back on FOREX would be next.
In simple terms, this is when we go to the bank and not before. The reason for the “holdup” is that these steps could not yet occur based on the current situation.
So, there is no bad news in these articles today, but you must know what is going on to appreciate exactly the ramifications of this news.
I also want to say everything so far is working according to the CBI plan of getting ready for this next phase.
We just have to let it play out. I know it is not on our timetable and even what my CBI contact told us it “might happen” at this time. I can’t control it.
THE DOLLAR MARKET IS ON “ONE LEG”.. A NEW MECHANISM AND THE EXCHANGE RATE IS THREATENED!
The Central Bank of Iraq is preparing to stop dealing with the electronic platform for dollar transfers abroad, at a time when experts have warned against raising the exchange rate to a higher level in light of the news circulating about this.
The electronic platform was launched in early 2023, and it represents a system for auditing dollar transfers before they are executed, instead of the audit that the US Federal Reserve used to conduct after execution.
Banks, companies and merchants in Iraq faced some challenges before adapting to the new method, but they finally underwent a series of trainings that the employees of these banks received before fully adapting to the platform’s work.
Exchange rate hike
In light of these moves, news has been raised about a move towards a new adjustment to the exchange rate, which has raised economists’ concerns about the potential impact of this move on the economic process in general.
Experts stressed that sudden changes in monetary policy could create additional confusion in the markets and undermine confidence in the financial system.
Economic expert Mustafa Akram Hantoush said, “Changing the exchange rate in the current situation is useless, because the problem is not in purchasing power, but in the demand for the dollar outside the platform due to small traders, trade with Iran, and some materials that are imported outside the platform due to high customs duties or their ban, in addition to the citizens’ desire to save the dollar.”
Hantoush added to Al Jarida that “it is better to find solutions to the increasing demand for the dollar outside the platform instead of resorting to changing the exchange rate, because that will complicate the monetary situation even more than it is now.”
clear policy
According to an official at the Central Bank of Iraq, dealing with the dollar file was based on various opinions built on a series of studies and field research.
The official, who preferred to remain anonymous, explained to Al Jarida that “the bank adopted two main approaches to address the crisis. The first is to expand the use of international currencies such as the Chinese yuan, the Indian rupee, the UAE dirham, and finally the Saudi riyal, with the aim of reducing dependence on the dollar. The second approach focuses on developing the operational capabilities of local banks to become more qualified to participate in transfer operations.”
For his part, banking researcher Mahmoud Dagher explained that “the fluctuation of the Iraqi dinar exchange rate came as a result of two decisions to reduce the value of the dinar in 2020 and then raise it in 2023, which represents a clear intervention in the fixed exchange rate system, which created ongoing economic confusion.”
Dagher told Al Jarida that “any new change in the exchange rate reflects the absence of benefit from previous mistakes, as wrong interventions in monetary policy lead to adverse results that increase the instability of the financial market.”
As for the economic expert, Adi Al-Alawi, he confirmed that “the biggest mistake that the government can make is to manipulate the dollar exchange rate through sudden decisions, because that has a direct impact on the national economy and shakes investors’ confidence in the financial system.”
Al-Alawi added to Al-Jarida that “the government’s continued taking of ill-considered decisions regarding the exchange rate will lead to the erosion of international and local confidence in the Iraqi economy, which will weaken the ability to attract the necessary investments to improve the economic reality.”
I saw this article this morning and wanted to share this with you. I'm heading out the door, see ya next week.
"The official noted that the platform’s suspension is scheduled for the end of this year." 👇
🇮🇶 A senior official from the Central Bank of Iraq (CBI) dismissed reports claiming that the bank's e-platform for foreign currency transfer had been officially suspended starting December 23, 2024.
Speaking to Shafaq News Agency on condition of anonymity, the source clarified that, “The auction operated as usual today, and no official decision to halt the platform has been made thus far.”
The official noted that the platform’s suspension is scheduled for the end of this year, as previously announced by the bank. However, “this step will not halt currency transfer operations as some have suggested. Instead, the process will transition to direct dealings between Iraqi banks and correspondent banks.”
The Central Bank representative pointed out that “many Iraqi banks are equipped to directly engage with correspondent banks, aligning with advanced international banking standards.”
FLUCTUATING DINAR: ECONOMIC EXPERTS URGE ACTION AS DOLLAR SOARS IN IRAQ
Iraq’s dinar continues its erratic trajectory against the US dollar, with no resolution in sight despite years of governmental and central bank efforts, experts attributed the instability to weak policies and unchecked market manipulation.
Root Causes of Volatility
The dollar is surging against the dinar at Baghdad’s main currency exchanges, Al-Kifah and Al-Harithiya, surpassing 1,510 dinars per $1. On the streets, exchange shops are marking up selling prices to more than 1,520 dinars.
“The instability in dollar prices reflects the Iraqi Central Bank and government’s inadequate monetary policies, which fail to address the core of the issue,” said Mustafa Faraj, an economic expert. “Their hesitant measures have left them unable to control the dollar’s value.”
Faraj cited US sanctions on neighboring Syria and Iran as a major factor. “The lack of legitimate trade channels with these countries, combined with restrictions on dollar transfers to them, has led to dollar smuggling, driving up its price,” he told Shafaq News Agency.
“When the dollar rises, it pushes up the cost of basic goods, food, and even commercial activity. This cascade of price hikes stems from a failure to find comprehensive solutions and punish manipulators,” Faraj explained.
Emerging Pressures
New dynamics have exacerbated the crisis. Ahmed Eid, an economic researcher, linked heightened demand for dollars to the fallout from the conflict in Syria. “The shift in Syria has disrupted the interests of militia leaders and influential figures, many of whom are now stockpiling dollars to secure alternative income streams,” he said.
Eid pointed to the closure of Syria’s border with Iraq as a catalyst, forcing traders to seek new suppliers in countries like Turkiye and Egypt. “This transition requires substantial dollar liquidity, which further squeezes the market,” he said.
Currency smuggling and money laundering also continue to erode market stability. “These illicit activities persist unchecked, compounding the dollar’s rise,” Eid warned.
Future Uncertainty Amid Policy Shifts
Concerns are mounting about the impact of Iraq’s planned phase-out of its electronic transfer platform for dollar transactions. Introduce
d in early 2023, the platform was designed to monitor transfers more effectively. However, the Iraqi Central Bank announced in September that it would be discontinued by year-end.
“The Central Bank’s plan to shift dollar transactions exclusively to foreign banks with correspondent relationships is a blow to local banks,” said economist Ahmed Abdul Rabih. “Four dominant banks will monopolize the sector, sidelining smaller institutions and creating a bottleneck for dollar supply.”
“These banks will dictate the exchange rate, likely driving up prices. The Central Bank must advocate for local banks to establish accounts with international institutions like J.P. Morgan and Citibank,” Abdul Rabih urged.
Reassurances from the Central Bank
In response to public concerns, the Iraqi Central Bank has downplayed fears of major disruptions.
In a statement, it described the transition as part of a phased strategy to align with international standards, emphasizing that 95% of transfers had already shifted from the platform to direct banking relationships.
“The transition will be completed gradually, ensuring continuity,” the bank stated, adding that partnerships with foreign banks in China, India, Turkiye, and the UAE would facilitate trade using non-dollar currencies, such as the yuan and euro.
Thirteen Iraqi banks have already begun operations under the new framework, offering pre-approved transfers and enabling global payment systems for personal and commercial needs, the statement said. These steps aim to “stabilize the currency and curb inflation, reinforcing official exchange rates as the benchmark for legitimate economic activities.”
“The official rate reflects real market dynamics,” the Central Bank stressed, warning against unofficial rates driven by “those engaging in unauthorized practices.”
The bank emphasized that it has structured external transfer operations and the fulfillment of dollar demand along proper channels, aligned with international practices, standards, and the Anti-Money Laundering and Counter-Terrorism Financing Law.
“Providing these channels for all purposes at the official dollar exchange rate makes this rate the true benchmark for economic practices, as evidenced by price stability and inflation control. Any other rate traded outside these channels is considered irregular and utilized by those engaging in non-compliant or illicit practices who avoid official channels in their dealings. These individuals bear the additional costs of purchasing at higher rates than the official price to create the illusion of a disparity between the official and unofficial rates.” The statement concluded.
Despite reassurances, skepticism lingers among economic experts, who argue that without stricter enforcement and comprehensive reforms, the dinar’s fluctuations will persist. For many Iraqis, the cost of living remains tightly bound to the fate of the dollar.
😊Now let me explain the good news about this article above and yet another one like it titled “FLUCTUATING DINAR: ECONOMIC EXPERTS URGE ACTION AS DOLLAR SOARS IN IRAQ“.
Folks the dollar rate in the parallel market should be soaring. Get it? Let me explain.
To explain the news in these two articles you must realize what is happening with the new “currency sales window”.
Of course, the rate of the dollar is going to surge to new highs as the demand goes up because of scarcity of the dollar in the black market (parallel market) – supply and demand.
Get it?
Supply creates scarcity and scarcity drives the price up. Think, think, think!
Isn’t this exactly what the CBI is trying to do?
The CBI is trying to finally break the parallel market with shortages of the dollar and eventually there will be very little dollars available even to sell in the parallel market.
But in the meanwhile, prior to the dollars drying up, the rate will skyrocket. It will be short lived and then the plan is for it to settle down to the “official” CBI rate.
At least, like I told everyone, this is the plan. We must just sit tight and pray that the CBI is correct and they can break the parallel market once and for all.
What happens next?
Once the parallel market is matched or close to the “official” CBI rate the next phase of the process that we have been waiting for now for over a year can happen.
That phase is an in-country rate change at or just over a dollar.
Next the currency switch-out to the newer lower denominations can begin.
This was Dr Shabibi’s plan all along since its inception in 2011.
He nearly executed it too in 2012-2013.
After the currency switch out and period to monitor for inflationary reactions with new rate, the move to reinstate the dinar back on FOREX would be next.
In simple terms, this is when we go to the bank and not before. The reason for the “holdup” is that these steps could not yet occur based on the current situation.
So, there is no bad news in these articles today, but you must know what is going on to appreciate exactly the ramifications of this news.
I also want to say everything so far is working according to the CBI plan of getting ready for this next phase.
We just have to let it play out. I know it is not on our timetable and even what my CBI contact told us it “might happen” at this time. I can’t control it.
Unfortunately, I will not be talking to my CBI contact on Wednesday due to the Christmas holiday but I will try a call on Saturday and maybe I will get an update and even better news by my Tuesday Newsletter.
Just so you know this will be the only Newsletter for this week of Christmas – NO THURSDAY Newsletter this week. Everyone should just enjoy the holiday with family and friends. Do not expect the RV and I just showed you why.
