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Fears for the dinar. What is the benefit of importing dollars from outside Iraq?


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Importing dollars in Iraq



Controversy continues in economic circles after the decision of the Central Bank of Iraq to import dollars from outside Iraq according to certain controls, and the purpose of this decision and the possible benefits, in light of the continuing dollar crisis with measures to restrict its circulation outside government platforms.

Importing dollars from outside Iraq sparks controversy among economic circles

On November 8th, the central bankallowed Iraqi banks to "import foreign currency" for the purpose of "meeting the demands of companies, organizations, bodies and individuals working for foreign companies or institutions" by importing them from "exclusively through air ports" in an attempt to control the dollar crisis in Iraq.

Immediately after that announcement, leaks circulated by the state news agency, quoting sources who did not indicate their job or the entity they work for, starting with "intensive meetings between a delegation from the Central Bank of Iraq and theAmerican side responsible for foreign remittances to cover imports" in the UAE city of Abu Dhabi, which concluded with several decisions, including "an agreement to strengthen the advance balance of five Iraqi banks in their dollar accounts with Jordanian banks and remittances through (JPMorgan)." Then I talked about an agreement on five more through Citi bank."


Is there any point in importing dollars?

The Central Bank's decision to import dollars from outside Iraq came in the context of the rise in the exchange rate of the dollar against the dinar in the local markets, until it reached a few days ago to 167 thousand dinars per 100 dollars, compared to the official rate that was set at 132 thousand dinars per 100 dollars, before declining to 160 thousand at the present time.

Ahmed Saddam, a professor of economics at Basra University, said, "The central bank's decision to allow the import of dollars aims to raise the level of supply of dollars from sources outside the framework of the central bank in a new attempt to reduce the exchange rate of the dollar in the parallel market."

As for the results of importing dollars at the practical level, Saddam ruled out that the decision will achieve "tangible benefit," and the main reason, according to him, is that "most countries of the world impose restrictions on the exit of dollars from their markets, as Iraq is trying to do."

Economists talked about the benefits of the Central Bank of Iraq's recent decision to import the dollar currency from abroad, or not

The economist, in an interview with "Ultra Iraq", raises a second question in this regard, through questions such as: "In what currency will this dollar be bought? Will it be done in Iraqi currency?" He goes on to say: "The Iraqi currency is not accepted in most countries except Iran, which does not allow the sale of dollars at all because of their urgent need for it, as is known."

Saddam continues: "Do Iraqi banks have currencies for other countries to be exchanged for dollars?" He answers: "If we assume that Iraqi banks own the currencies of other countries, this procedure will be temporary by virtue of the exhaustion of existing foreign currencies for the purpose of buying dollars in the short term."

Indeed, the "sources" talked among the news quoted by the official agency' about meetings between "one of the UAE banks, the Central Bank of Iraq and the American side, to implement the mechanism for enhancing the balances in UAE dirhams for Iraqi banks (UAE Dirham pilot)", as well as "negotiations to enhance the balances of some Iraqi banks in euros with UBAF Bank to finance trade with the European Union", as well as "increasing the number of banks whose balances are strengthened in Chinese yuan through the Singapore Development Bank", and "starting to open bank accounts in rupees". Indian for a number of Iraqi banks in the same correspondent Singapore Development Bank."

Economics professor Ahmed Saddam concludes by saying that "the central bank's decision is difficult to achieve on the ground, and perhaps it can be implemented for a limited period by banks that own other foreign currencies," but all these measures "will not contribute to reducing the exchange rate of the dollar due to the state of high dependence on the dollar in foreign trade dealings with the restrictions of the US Federal Reserve, speculation, and smuggling operations that cannot be solved by importing dollars."




The central bank is not an intermediary!

On November 15, 2023, a "government source" quoted a "government source" as saying that official approvals had been issued by the Central Bank "to three Iraqi private banks to import US dollars to meet their customers' need for this currency and in amounts of up to $100 million."

The decision to import dollars from abroad was issued at the request of traders to feed the local market

The Central Bank's approach is not a new measure, says Abdul Rahman al-Sheikhli, advisor to the Iraqi Banks Association, as it was "previously implemented in 2010 under the guidance of the Central Bank," but what is new now, according to al-Sheikhli, is that "the decision was issued based on the desire of traders in order to meet the needs of the local market."

The banking expert believes in an interview with "Ultra Iraq" that the Central Bank "will not be an intermediary in the process of importing dollars, but banks are the ones who will play this role in their relations with banks outside Iraq by relying on their dollar stocks."

The central bank's exit from the mediation process comes despite its official statements rejecting the existence of the "parallel market" on the grounds that it is the only source of dollars in the country.

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Somebody does not want their cash cow to end. But if they genuinely stop the use of the dollar in the new year and it can only be bought through the electronic platform then common sense would indicate that the street traders will go away eventually. However , we know it is a very corrupt country and thus we need to realise it will not happen over night. 

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