MZ: I have an article that reminds me of the article that came out in Kuwait the day they revalued. “ Parliamentary finance settles the matter: the exchange rate will not change.” There are several “Kuwait style” articles that came out overnight and this morning. Most them are about “exchange rates”
Member: What time of day did Kuwait revalue?
MZ: I want to say –maybe 11 AM to 2 pm? ……does anyone know for sure? But it was during Kuwaits daylight hours. That would be wee hours overnight for us.
MZ: “Sudanese advisor reassures via Shafaq news about the rise of the dollar –the temporary market bubble” They are saying over the holidays there will be a temporary rate increase of the dollar. They are expecting it and have mechanisms for it. And yes they had held auctions the last couple of days.
MZ: “Dollar auctions: What is the fact that the central banks currency conversion platform has been stopped?” They want us to know there are still auctions but that they are expected to stop in the new year.
For days now, the Iraqi markets have witnessed a noticeable decline in the value of the Iraqi dinar against the US dollar , amidst confirmations by Iraqi financial experts that this rise is due to the imminent closure of the foreign currency selling platform, specifically the dollar, by the Central Bank of Iraq as part of a series of reforms it had pledged at the beginning of last year.
For about 18 years, the Central Bank of Iraq has been carrying out dollar sales operations against the Iraqi dinar with the aim of maintaining a stable value for the dinar and reducing the burden of speculation in the market. However, a number of reasons prompted it to stop what is known locally as the “dollar auction,” including dollar smuggling operations to neighboring countries and huge money laundering crimes , which Washington says are in the interest of Iranian parties, most notably the Iranian Revolutionary Guard.
Today, Thursday, the value of the Iraqi dinar decreased against the dollar, by 1520 dinars per dollar, after it had maintained a value of between 1480 and 1500 dinars per dollar in the parallel market, while the value set for the dinar by the Central Bank is 1320.
In this regard, member of the Finance Committee in the Iraqi Parliament, Mohammed Radhi, told Al-Araby Al-Jadeed, “The decline in the value of the dinar in the parallel market, not its official value, is due to the imminent suspension of the dollar selling platform by the Central Bank. This step caused fear in the local market, which prompted traders to increase demand for the dollar from the parallel market, which led to its rise.”
He expected the rise to be temporary for a period of time, “after getting used to stopping the platform and adopting the normal thing, which is going to banks and official banks to conduct foreign commercial transfers,” stressing that “the Central Bank of Iraq has expanded the basket of foreign currencies that can be dealt with and ended reliance on the dollar only, and this diversity will reduce the dollar exchange rate in the parallel market and raise the value of the Iraqi dinar in the future, and the tasks of the Central Bank will be limited in the coming days only to monitoring and following up on the work of local banks covered by direct foreign commercial transfers, and not selling the dollar to merchants.”
In contrast, the financial and economic advisor to Prime Minister Mohammed Shia al-Sudani, Mohammed Saleh, said in press statements today, Thursday, that “the difference between the two exchange rates in the market is basically stable for reasons related to controlling the sale of cash dollars from legal outlets to travelers in an organized manner and subject to a precise rule of compliance and auditing, in addition to the ability of the traveler to obtain other permitted amounts through payment cards in all their forms, and in sufficient and comfortable amounts at an exchange rate of 1320 dinars per dollar.”
Saleh added, “It is expected that the market, due to the end of the previous foreign transfer platform and the transition to new mechanisms to enhance foreign currency to meet the banks’ needs for foreign currency to finance foreign trade, was accompanied by a wave of misinformation, misunderstanding and confusion that was exploited by the parallel market and speculators for quick profit.”
The financial and economic advisor to the Prime Minister considered that this increase is “called a temporary market bubble that is built on unrealistic speculations and disappears over time, which requires attention to the phenomenon of exploitation and profiteering generated by false and baseless information.”
In early 2023, Iraq announced the adoption of an electronic platform to monitor the movement of dollar sales and money laundering operations, following warnings issued by the Federal Reserve (the US central bank), in addition to the Treasury Department punishing several local banks for their involvement in suspicious activities. A statement by the bank stated that “it was decided to expand the external transfer channels for local banks to include new currencies: the Jordanian dinar and the Saudi riyal, and to allow Iraqi banks to finance trade with Turkey in euros after it was previously limited to using it with European Union countries, in addition to transfers available in US dollars, Emirati dirhams, Chinese yuan and Indian rupees.”
Previous decisions by the US Treasury to impose sanctions on 18 Iraqi banks for financial dealings with Iran and others linked to money laundering operations caused a swift backlash inside Iraq, causing the value of the dinar to decline and depositors to flock to the sanctioned banks to withdraw their dollar deposits. With more than $113 billion in reserves in the United States, Iraq relies heavily on Washington’s goodwill to ensure that its oil revenues and cash are not subject to US sanctions.
Last October, the US government rejected an Iraqi request for $1 billion in cash from the Federal Reserve from Iraqi funds generated from oil revenues, due to its opposition to efforts to curb excessive dollar circulation and stop illicit cash flows to countries banned by the US Treasury.
The economist, Safwan Qusai, called for a re-evaluation of the cost of oil production in Kurdistan under the supervision of an international auditing company.
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Safwan told {For the Euphrates News} that he said: “With the arrival of the budget tables by the government, the Presidency of Parliament is supposed to task the Finance Committee with studying them in order to approve them faster to avoid the agreement in 2025.” He added, “There is an urgent need to return the cost of producing a barrel of oil from the fields of the Kurdistan Region and raise this figure under the supervision of an international auditing company to $ 16 or in proportion to this cost and that the region undertakes to deliver more than 400,000 barrels to SOMO Company.” Safwan pointed to “the amendment of the article on the export of Kurdistan oil guaranteed a cost increase of $6 at the level of all oil fields in Iraq, and this rate can be reduced in some governorates to two dollars and the transfer can be strengthened for the purpose of financing $16 from the Ministry of Finance to the region.”
He continued, “There is a desire on the part of China next year to double its total production in the sense that we expect to increase Iraqi oil consumption, which may give importance to increasing the value, thus the possibility of canceling voluntary reductions by OPEC and returning the Iraqi oil pumping to its normal production rates of 4 million and 500 thousand barrels of oil per day.” With regard to the industrial city project in Basra, Safwan explained, “After the completion of the census, we have a clear map of the deficit in residential units for at least two colors and 500,000 housing units are supposed to be established. The demand for iron will rise with the existence of service projects and the need to establish a system of trains.” He stressed “the need to develop the steel iron industry in Iraq to move to the steel industry and create an economic partnership with companies based on iron and steel, whether in the housing sector, cars and the rest of the iron products,” adding, economic diversification “an important step planned by the government to rehabilitate the private sector, which suffers a lot.” Regarding the fluctuation of dollar prices and their impact on citizens, Safwan said that “there are still ambitions on the part of the Central Bank of Iraq to modernize banking systems and involve as many banks as possible in the process of financing foreign trade by re-esysttling them and linking them to the system of international correspondents; but these efforts alone will not be able to control the exchange rate. We need to invest in technology at border ports.”
Member: What’s the new expected timeline Mark? Jeff B says Iraq revalued in-country at $7.88?
MZ: I would love to think that is accurate…..Unfortunately that is not what I am hearing from my Iraqi contacts this morning.
They are pretty upbeat though. My contacts still think it could go at any moment and are prepared for it.
Member: Hey mark- any bond contacts getting paid? Wolvie said several platforms were getting paid, can you confirm?
MZ: Reno has not started. But you will probably get a lot of rumors everywhere today. Folks should start getting back into place after the holidays…..we should start getting more info later on. Some may not return to their places until Jan 2nd…but that does not mean it can’t go before then.