Iraqi Dinar: IBBC issues Major New Paper on De-Dollarisation of Iraq

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Professor Frank Gunter launches a new white paper on de dollarisation of Iraqi economy

Professor Frank Gunter publishes a new paper commissioned as part of a series by IBBC's advisory council on the challenges of de-dollarisation for Iraq.

The Advisory Council members and IBBC members have actively contributed to the paper in the past 4 months. It will be presented online on the 18th June in a webinar and in person at the Spring Conference on 2nd July. The Arabic translation will be published soon.

The Video for this Blogpost is Below here:

Register to join the webinar here.

Previous advisory papers include 2020, 'Iraq 2020: Country at the Crossroads', 'Corruption Worse Than ISIS: Causes and Cures Cures for Iraqi Corruption', 'Seaports and Airports of Iraq: Rules Versus Infrastructure' and 'Privatization of State-Owned Enterprises'.

Professor Gunter provides an analysis of the drivers of impact on the dinar exchange rate and examines how best to deal with the parallel market of dinars to dollars. He outlines the practical policy initiatives that should reduce the gap between the official and parallel exchange rates in the medium-term.

In particular he lauds the Government of Iraq on its commitment to tackle corruption and to modernise the banking system in one fell swoop but warns of the pressure on the dinar exchange rate as budgets are overstretched and the new banking recipients (state banks) receive the liquidity to enable the economy to perform.

He writes 'All three of these forces - the anti-corruption effort, the banking liberalization, and the lavish 2023-2025 budget - will create challenges for the management of the dinar exchange rate. One could argue that over the last two decades the Government of Iraq (GoI) had little control over its exchange rate; that exchange rate policy was determined by other sectors of the political economy in Iraq. But even if this is true, the level of the exchange rate and changes in that level are believed by many Iraqis and foreigners as providing valuable insight into the quality of economic management in Iraq. This importance is exemplified by the current efforts to de-dollarize the Iraqi economy while there is excess demand for dollars. This excess demand is shown by a parallel exchange rate of roughly 1500 dinars per dollar compared to the official exchange rate of 1310 dinars per dollar.

An important cause of this exchange rate gap is that the GoI, with the strong encouragement of the U.S. Federal Reserve, is attempting to reduce the use of the U.S. dollar in both Iraq's internal economy and its external transactions. Since 2003, the U.S. dollar has facilitated economic growth in Iraq by providing a widely accepted medium of exchange for purchases as well as a reliable store of value for savings. In the long run, whether de-dollarization will have a significant adverse impact on the Iraq economy will depend on how rapidly the GoI can increase both the efficiency of alternative mediums of exchange and the perceived security of alternative stores of value.'

The report is available here to download.Shar

The Central Bank of Iraq: The expansion of electronic payment operations will push towards the adoption of electronic signature in Iraq

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The Central Bank of Iraq stressed the importance of proceeding with the adoption and implementation of the electronic signature project in Iraq.

Deputy Governor of the Central Bank, Ammar Hamad Khalaf, said in a statement to the National Iraqi News Agency : “The expansion of the use of electronic payment operations will impose the need to implement the electronic signature.”

He added: "The need for paper signatures in government transactions and official papers will diminish in the future, until the need disappears completely with the expansion of the use of electronic payment processes and electronic signatures in daily transactions. There will be an obligation to amend laws or implement previous legislation related to electronic signatures."

Last March, the Ministry of Communications announced that 90% had been achieved in the electronic signature project, which aims to include Iraq in the list of countries in the world whose electronic transactions are recognized as reliable, upon adopting the electronic signature in these transactions, which can be issued to any citizen or governmental or private entity. Desiring to obtain it by obtaining the internationally accredited electronic certification certificate, which will be issued by the Ministry of Communications in accordance with the law.

She explained: “Adopting the electronic signature in administrative and financial transactions in Iraq will contribute to simplifying procedures and supporting the government’s orientations towards digital transformation.” And reducing financial and administrative corruption.”/End 5