The dinar will recover. Iraq nears 'imminent end' of dollar crisis before end of 2023 » Baghdad News Agency Today (baghdadtoday.news)
The dinar will recover. Iraq nears 'imminent end' of dollar crisis before end of 2023
Economy | Yesterday, 11:59 |
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Baghdad Today - Baghdad
Today, Monday (November 27, 2023), the Parliamentary Finance Committee commented on the possibility of the Iraqi government succeeding in controlling the dollar by the end of the current year.
Committee member Mueen Al-Kazemi told Baghdad Today that "the government and the Central Bank are working to end the dollar crisis permanently, and there is great progress in this file and there is control over the market, as well as a gradual decline in exchange rates in the parallel market."
Al-Kazemi added that "we expect that the new year will witness a significant decline in dollar prices with the rise in the value of the Iraqi dinar, especially with the presence of government decisions and directives to address all the causes of the dollar crisis, and we expect that economic and financial stability will be strongly present at the beginning of next year."
Earlier, a senior official at the Central Bank of Iraq told Reuters that the country would ban cash withdrawals and dollar transactions from January 1, 2024, in the latest effort to curb the misuse of the country's hard currency reserves in financial crimes and evasion of US sanctions on Iran.
Mazen Ahmed, director general of the investment and remittance department at the Central Bank of Iraq, told Reuters the aim of the move was to stop the illegal use of about 50 percent of the $10 billion in cash Iraq imports annually from the Federal Reserve Bank of New York.
The move is part of a wider campaign to de-reliance on the dollar as residents began preferring the U.S. currency over the dinar.
Ahmed said people who deposit dollars in banks before the end of 2023 will be able to withdraw money in dollars in 2024. But dollars deposited in 2024 can only be withdrawn in local currency at the official rate of 1,320 dinars to the dollar.
Official Price
"You want to transfer money? to do. Want a dollar card? Please, you can use the card inside Iraq at the official rate, or if you want to withdraw cash, you can at the official rate in dinars... But don't talk to me about dollars in cash anymore."
Iraq has already set up a platform to regulate bank transfers, which make up the bulk of dollar demand, and which have served as a hotbed for fake receipts and fraudulent transactions that leaked dollars to U.S. sanctions Iran and Syria.
The system, put in place in coordination with authorities in the United States where Iraq's $120 billion in oil sales reserves are kept, is now semi-tight and provides dollars at the official rate to those engaged in legitimate trade activities such as importing food and consumer goods, Ahmed said.
But he said the misuse of cash withdrawals continued in ways that include those wishing to travel who are officially entitled to $3,000 but are looking for ways to circumvent the system.
Iraq relies heavily on its good relations with Washington to ensure that oil revenues and the country's money are not subject to U.S. surveillance.
Dollar shortage
Many local banks have already limited dollar cash withdrawals over the past few months, exacerbating shortages that have caused the exchange rate to continue to appreciate in the parallel market.
Ahmed said some banks are short of dollars because many people try to draw at the same time out of a sense of unease about the financial system, while some banks are also in short supply because they have provided dollar-denominated loans that have then been repaid in dinars.
The Central Bank of Iraq has also limited the amount of dollars it provides as part of an agreement with the US central bank to reduce cash liquidity and switch to electronic payments, he said.
Ahmed pointed out that the Central Bank of Iraq expects the dinar to lose more value with the entry into force of the new measures, but added that this is an acceptable side effect of formalizing the financial system, noting that the Central Bank of Iraq provides dollars at the official exchange rate for all legitimate purposes.
The cost to Iraq today was comparable to the value of achieving that goal.
Ahmed said that financing operations carried out transparently and legally through the bank and at the official rate are the most important, and therefore nothing else matters, even if the exchange rate reaches 1,700.
"The cost we bear now is nothing to achieve this goal, frankly, as long as legitimate channels are established that matter, even if the exchange rate reaches 1,700," he said. Because the legitimate purpose is the official price."
