The high exchange rate of the dollar against the Iraqi dinar poses a major economic challenge in Iraq, as it leads to a decline in the value of the Iraqi dinar and an increase in prices, which negatively affects citizens’ purchasing power and the stability of the national economy.
To address this situation, a set of proposed solutions and measures can be adopted that contribute to stabilizing the exchange rate and strengthening the economy, namely:
Reform of the financial and banking system:
A. Improving the management of foreign reserves:
The Iraqi government must improve the management of foreign reserves to ensure sustainable availability of foreign exchange. This can be achieved by enhancing oil and non-oil exports and increasing the state’s foreign exchange revenues.
B. Enhancing transparency in banking operations:
Enhancing transparency in local banking operations, especially with regard to buying and selling foreign currencies, which helps reduce illegal speculation and monopoly.
2. Diversification of the economy:
A. Reducing dependence on oil:
Diversifying sources of national income by developing sectors such as agriculture, industry, tourism, and information technology. This reduces total dependence on oil exports and makes the economy more resistant to global fluctuations in oil prices.
B. Support for small and medium enterprises:
Encouraging growth in the SME sector by providing financing and technical support, which enhances the local production base and provides new job opportunities.
3. Monetary and fiscal policies:
A. Interest rate management:
Effective use of monetary policy to adjust interest rates to suit economic conditions, which can help control inflation and support the exchange rate.
B. Improving public debt management:
Reducing dependence on external debt and managing domestic debt effectively to ensure no pressure on the local currency.
4. Combating corruption: Combating corruption in all its forms, especially at customs ports and banks, contributes to enhancing confidence in the Iraqi financial system and helps control foreign currency flows.
5. Encouraging foreign investment: Opening the door to foreign investment in non-oil sectors by improving the investment environment, reducing bureaucracy, and providing incentives to investors. This increases foreign currency inflows and strengthens the local economy.
6. International cooperation: Cooperation with international financial institutions such as the International Monetary Fund and the World Bank to obtain the technical and financial support necessary to implement the required economic reforms.
7. Trade policies:
A. Controlling imports: Developing policies to control the volume of unnecessary imports that drain foreign currency, with a focus on supporting local products.
b. Promoting exports: Encouraging Iraqi products to enter international markets by providing export incentives and improving product quality.
8. Cancelling the dollar auction: This is considered one of the most important measures required by the Central Bank to achieve stability in the exchange rate because its continuation has major effects on the currency market and on the Iraqi economy, the most important of which are:
A. Dollar auction: It is a source of manipulation and speculation, as it is used to make quick profits at the expense of market stability.
B. Corruption and money laundering: There are accusations that the auction is being used as a means of laundering money and transferring it out of the country illegally.
C. Negative impact on the dinar: Relying on the auction as a tool to control the exchange rate can lead to sharp fluctuations in the value of the Iraqi dinar.
The cancellation of the dollar auction will bring many benefits to the Iraqi economy, the most important of which are:
A. Enhancing transparency: Abolishing the auction can reduce corruption and illegal speculation, thus enhancing confidence in the financial system.
b. Monetary policy support: Enables the central bank to use other monetary policy tools more effectively to achieve price and exchange rate stability.
C. Stimulating the local economy: The cancellation may boost demand for the Iraqi dinar and increase confidence in the local economy.
There are potential challenges from the process of cancelling the dollar auction that must be taken into consideration and prepared for, the most important of which are:
Exchange rate volatility: The cancellation of the auction may result in significant fluctuations in the exchange rate in the short term before the market stabilizes.
2. The need for alternative mechanisms: The abolition must be accompanied by the introduction of alternative mechanisms to control the market and prevent currency manipulation.
There are procedures that must accompany the cancellation of the auction, the most important of which are:
A. Strengthening banking supervision: Strengthening supervision of banks and exchange companies to prevent illegal speculation and monopoly.
B. Developing the currency market: Developing the local currency market and making it more transparent and efficient, through which the exchange rate can be determined.
Exchange based on real supply and demand.
3. Great resistance and great political pressure: Because the currency auction is backed by big whales of profiteers and politicians who will exert all kinds of pressure to fight the cancellation process.
C. Supporting foreign reserves: Enhancing foreign reserves by improving exports and attracting foreign investments, which enables the central bank to intervene in the market when necessary.
D. Public awareness: Implement awareness campaigns to explain the importance of this measure and reassure citizens about the stability of the currency and the economy.
In conclusion, the current situation of the Iraqi economy and the inability of the Central Bank to control the exchange rates of the local currency against the dollar necessitates taking these bold measures that will contribute to stabilizing the market, reviving the Iraqi economy and protecting the Iraqi citizen from the negative consequences that he always bears with every rise in the dollar.
shafaq.com
