VictorD: Good Read. Explains a lot.
Iraqi dinar trembles as US fights currency flow to Iran
Recent measures taken by US authorities to tighten the channelling of dollars to Iran from Iraq have decreased the value of the Iraqi dinar on the black market, government officials and traders said on Monday.
The Iran-backed Iraqi government has been struggling to control the exchange rate to contain mounting public anger over soaring goods prices.
The dollar exchange rate in the black market has been hovering around 1,550 Iraqi dinars from around 1,470 dinars, Dhirgham Hameed, owner of a Baghdad-based exchange company, told The National.
“The dinar has been trembling against the dollar since early this month, wreaking havoc in the market,” Mr Hameed, 44, said.
In 2004, the Central Bank of Iraq introduced the foreign currency auction as one of its policy tools to achieve monetary stability.
Through that auction, the government has succeeded in controlling the exchange rate on the black market.
For years, the official rate for banks and exchange companies was 1,182 dinars, while the rate on the street was around 1,200 dinars.
However, the process has been mired with accusations of corruption, money laundering and the channelling of dollars to Iraq’s neighbours, Iran and Syria, using forged bills. Both countries are under punishing US sanctions.
Since then, the US has blacklisted a number of Iraqi banks that deal mainly with Iran. The US sanctioned Iraq’s Al Bilad Islamic Bank for dealing with Iran’s Islamic Revolutionary Guard Corps in May 2018.
Amid a liquidity crisis due to plummeting oil prices on the international market, Iraq’s Central Bank devalued the dinar in December 2020 to 1,460 dinars per dollar for banks and 1,470 dinars for individuals.
But that didn’t stop the outflow of much-needed hard currency.
The US Ambassador to Iraq has complained to Iraqi officials on many occasions that the dollar was still being sent to Iran, a Central Bank official and a lawmaker said.
But Mohammed Shia Al Sudani’s government, which took office in late October and is close to Iran, has not taken any action, they said.
“When there was no action from the government, the Federal Reserve bank started to apply scrutiny measures on foreign transactions and that has delayed the process of releasing the money from the US to cover the imports and other needs,” the Central Bank official said.
Both spoke on condition of anonymity as there is no government statement on the latest US measures.
How the process goes
Each dollar Iraq gains from selling crude oil goes to an account at the Federal Reserve Bank of New York, and Iraq makes withdrawals to pay government salaries and imports.
Oil revenue makes up nearly 95 per cent of the federal budget and the war-torn country depends heavily on imports to meet the demand for food and materials for key sectors of the economy.
The Federal Reserve Bank of New York supplies Iraq with hard currency on request from the Iraqi government, either in cash or foreign transactions.
While some of these funds are used to cover government imports and other requirements, much of it is passed on to commercial banks, ostensibly for private sector imports in a process that was hijacked long ago by Iraq’s money-laundering cartels.
Thanks to Iraq’s growing oil revenue, the Central Bank of Iraq has about $96 billion in foreign exchange reserves, Mr Al Sudani announced early this month.
As of last month, the CBI sold an average of $240 million to $250 million a day, said another owner of an exchange company, who asked to remain anonymous.
Only 10 per cent to 20 per cent of the money was cashed out to be distributed to banks and exchange companies and then to individuals, while the rest was sent to accounts in Dubai, Turkey, Amman and China to cover private sector imports, he said.
“Iraq has no problem with the money at all, it has good reserves,” the exchange company owner said. “It sounds as if the issue is politically motivated because the Americans are upset.”
Over the past 19 years, the Federal Reserve has never delayed a request or transaction from Iraq, he said. “They used to approve any bill immediately,” he added.
“But since early this month, the Americans have started applying scrutiny measures on foreign transactions and the new process has delayed each transaction for up to two weeks,” the exchange company owner said.
He added that most of the requests were being rejected due to suspicions that some banks are linked to Iran.
Since then, daily transactions have dropped from around $200 million to between $20 and $30 million a day.
“The reserves have been dried up in the accounts abroad and that has pushed up the demand for the dollar in the local market to cover imports,” he said.
To control the rate at the black market, the government has asked the CBI to take urgent steps to compensate for a dollar shortage in the local market.
It reduced the exchange rate for individuals from 1,470 dinars to 1,465 dinars to cover travel for the Hajj pilgrimage, medical treatment and study.
It also asked the CBI to help private banks strengthen their non-US dollar foreign currency reserves such as the Chinese yuan, the euro, the Emirati dirham and the Jordanian dinar.
But these measures failed to strengthen the currency.
“We are not optimistic and we believe that the worst is yet to come unless the government applies urgent, immediate and effective measures,” Mr Hameed said.
The current official dinar to dollar exchange rate is 158,000.
VictorD: Interesting that this is still happening. IMO this is the money our past President refered to when he stated we have “x” billions of Iraqs money we can take/freeze. He wasn’t talking about currency.
“Each dollar Iraq gains from selling crude oil goes to an account at the Federal Reserve Bank of New York, and Iraq makes withdrawals to pay government salaries and imports.”
Tishwash: Very shocking news.. The dollar is heading to 2,000 dinars amid a government deficit
Financial experts expected the exchange rate to reach 200,000 per hundred dollars in the event that the current crisis is prolonged.
The economic and financial expert, Mahmoud Dagher, commented, during his speech in a press interview, regarding fears that the exchange rate would reach 200,000 dinars per 100 dollars. He said that “the longer the crisis lasts, the dollar is expected to reach 200,000 dinars.
” “The longer the process of disagreement and unwillingness to concede, the price will rise, and the United States must give up using the shock method, and in return, Iraq must develop its tools to improve the performance of the window.”
The economist, Salam Sumaisem, agreed with what Dagher put forward, stressing in the same dialogue that “if the crisis is prolonged, the exchange rate reaching 200,000 dinars is an inevitable result, because the longer the exchange rate goes on, the higher the exchange rate, as a result of the high uncertainty.”
CandyKisses: Mohammed Allawi on the crazy rise in the exchange rate: speculators and interest in millions of dollars a day
Baghdad – Nas
Iraqi politician Mohammed Tawfiq Allawi spoke on Monday about the recent rise in dollar prices and the reasons behind it.
Allawi asked in a post followed by “Nas”, (December 26, 2022), saying: “Who is the beneficiary of the rise in the price of the dollar???? Is it possible to return the price of the dollar to its real price in less than 24 hours???”.
He added, “The price of the dollar has risen these days to more than 158 thousand dinars per 100 dollars, and this price is unusual and unexpected, as its real price is 146 thousand dinars per 100 dollars, and the reason for this rise is the lack of supply and increased demand, due to the exclusion of four banks by the Central Bank from the window of selling currency due to corruption, and here we wonder whether the Central Bank can return the exchange rate to the real rate, i.e. 146 thousand dinars; the answer: Yes, it can, within a period not exceeding 24 hours, by increasing the supply through private banks and money changers, as well as government banks, especially Rafidain and Rasheed Bank, so that the supply covers the demand.”
He continued, “But if the central bank does not move to cover demand, it is normal for the dollar to rise and continue to rise to unprecedented levels, and I cannot accuse specific people, but I say that speculators achieve daily benefits exceeding fifteen million dollars a day if we assume that the central bank sells on average about 200 million dollars a day!!!.. Yes, this difference achieves these large profits at the expense of the interest of !!!!! citizens.”
He also asked, “Are there hidden hands deliberately prolonging the crisis, which can be solved in less than 24 hours???? Who is responsible for the suffering of citizens????? Questions that need answers!!! Some accuse outside parties, and I cannot deny this, but I rule it out greatly!!! The future will reveal the hidden!!! , and the future will reveal who is responsible for this suffering!!! The future will expose the corrupt!!”
Tishwash: A parliamentarian warns of an economic catastrophe
A member of the Parliamentary Services and Reconstruction Committee, Burhan Al-Mamouri, warned today, Wednesday, of the possibility of an economic catastrophe if the exchange rate deteriorated, while stressing that the continuous decline overwhelms the greedy and harms the fragile classes.
The media office said in a statement received by the National News Center that “the various countries of the world depend on monetary policies and developed economic systems,” noting that they “control the stability of their currencies’ prices against foreign currencies.”
He added, “The foreign currency sale auction adopted by the Central Bank of Iraq needs to be reviewed,” pointing out that it “raised a lot of confusion and suspicions over the past two decades.”
He explained that “the continuous decline in the exchange rate of the Iraqi dinar against the US dollar has greatly harmed the fragile classes of society,” stressing that “on the other hand, it has filled the pockets of the greedy.”
Al-Mamouri called on the central bank administration to “take urgent measures to control the exchange rate in the local markets,” noting “the need to preserve the value of the dinar against the dollar.”
And he warned of the possibility of a monetary catastrophe that might collapse the local economy, which is suffering a lot, stressing “the importance of developing immediate solutions to prevent the continued deterioration of the local currency exchange rate.” link
Tishwash: In the document, the Central Bank takes action to address the rise in the exchange rate
The Central Bank of Iraq decided to stop the work of collecting taxes in advance to deal with the high exchange rate.
To / all authorized banks
M / collection of customs duties and taxes
Based on Cabinet Resolution No. (351) for the year 2022, which includes non-compliance with the collection of customs duties and amounts
Advance taxes provided for in Article (16/fourth) of the Federal General Budget Law for the fiscal year 2021/2021, until the end of
It will come into force at the end of the fiscal year 2021, with confirmation that the General Authority for Customs and the General Authority for Taxes have met those fees and amounts
Taxes on goods entering Iraq at the border crossings.
To kindly inform and inform your bank customers and to act accordingly and prevent double taxation…with appreciation
Dr.. Ammar Hamad Khalaf
Vice Governor Agency link
Tishwish: What is the relationship of Washington and China to the high exchange rate of the dollar in Iraq?
On Monday, the leader in the coordination framework, Turki Al-Atbi, explained the fact that there is a relationship between Washington and China with the rise in the exchange rate of the dollar, which reached 159 thousand during the past hours in Iraq.
Al-Utbi said in an interview with (Baghdad Today), “The Iraqi-Chinese rapprochement has disturbed Washington a lot in recent months, especially with the growing entry of companies into the energy, oil and education sectors and the emergence of important partnerships, not to mention the Sudanese presence in a strategic conference in Riyadh on development with Beijing in the presence of many of the Arab leaders.
He added, “Washington has many pressure factors in the Iraqi scene, including manipulating the pumping of the dollar into the markets, and this is what led to raising the exchange rate in order to create popular anger and organize demonstrations to put pressure on the Sudanese government later in order to negotiate the relationship with China and the rest of the other files.”
Al-Atbi pointed out that “America will not hesitate to do anything in order to prevent any development in Iraq through the gate of China or any other country,” stressing that “Baghdad’s balances in Washington are in constant danger, and we must reconsider keeping the balance of funds in America because it will always be used.” in economic pressure.
Earlier in the day, the price of the dollar, even before the closure, reached 158 thousand and 250 dinars, for every 100 dollars, and it was heading towards 159 thousand dinars, in an unprecedented excess of dollar prices since its change in late 2020. link