The exchange rate of the Iraqi dinar has been witnessing fluctuations against the dollar for about two months, despite the large jump in foreign exchange reserves, which is currently close to 100 billion dollars, thanks to high oil prices.
Experts revealed that the secret behind these fluctuations is that Iraq has begun to comply with international measures on remittances in hard currency, while parties in the country hold Washington responsible for this decline.
While the official exchange rate installed is 1470 dinars against the dollar, the price of the dinar in the market since mid-November has fallen to 1600 dinars over the weekend, before settling at about 1570, according to the official news agency, that is, the Iraqi currency lost about 10 percent of its value
This decline is not huge, but it is starting to worry Iraqis about the rise in the prices of imported materials, such as gas and wheat, for example.
The prime minister’s adviser on finance Mazhar Saleh says in an AFP report that the “fundamental and fundamental reason” for this decline “is an external constraint”
But some Iraqi politicians consider the United States to be behind this volatility.
On the other hand, economist Ahmed Tashishli believes that “contrary to rumors and misinformation, there is no evidence of US pressure on Iraq,” the important economic and trade partner of neighboring Iran.
In fact, the volatility of the dinar is linked to Iraq’s start of compliance with some of the standards of the International Remittance System (SWIFT), which Iraqi banks must apply since mid-November to access Iraq’s dollar reserves located in the United States.
In order for Iraq to access those reserves amounting to $100 billion, it must now comply with systems that “require compliance with global anti-money laundering provisions, anti-terrorist financing provisions, and those related to sanctions, such as those applicable to Iran and Russia,” according to Raqishli.
He adds that this is about Iraq’s entry “within a global remittance system that requires a high degree of transparency,” but this is “shoic cause” for many Iraqi banks “because they are not used to this system.”
Mazhar Saleh explained that Iraqi banks should currently register “they transfers (in dollars) on an electronic platform, checking orders… The U.S. Federal Reserve is examining it and if it has doubts it stops the transfer.”
Since the entry into force of the restrictions, the Federal Reserve has rejected “80 percent of requests” for remittances to Iraqi banks, Saleh said, on the back of doubts about the final destination of those amounts being transferred, he said.
This rejection affected the dollar’s supply in the Iraqi market. On the other hand, demand accumulated, but the supply was inconsistent with it, and therefore the exchange rate fell as bank transfers fell in dollars.
The Central Bank of Iraq spoke in a statement on Tuesday about the return of the exchange rate to what it was within two weeks, describing the “dollar price turmoil” as a “temporary situation.”
In the meantime, the Iraqi authorities have taken measures, including facilitating the financing of private sector trade in dollars through Iraqi banks, and opening outlets for the sale of foreign currency in government banks to the public for travel purposes.
The Council of Ministers also decided to “commit all government agencies to sell all goods and services inside Iraq in dinars and at the price of the Central Bank of (1470) dinars to one dollar.”
Mazhar Saleh believes that “these measures are important because they show that the state exists to protect the market and the citizen,” and help “repel the problem.”
Although the dinar has fallen, inflation remains small, reaching 5.3 at an annual pace in October 2022, according to the Ministry of Planning, but actual concerns relate to the purchasing power of the population.
Added 2023/01/15 – 11:04 AM
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