Parliamentary Committee: Government working to reduce gap between parallel and official exchange rate to achieve stability
The Parliamentary Finance Committee explained, on Monday, that the government is working to reduce the gap between the parallel and official exchange rates to achieve stability, while indicating that the Iraqi economy will not be affected by the deteriorating conditions in Syria .
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Committee member Moeen Al-Kazemi said in a statement followed by "Mil", "The government and the Central Bank have taken several important measures to confront the security and economic challenges in the country, especially in light of the deteriorating conditions in Syria ."
Al-Kadhimi continued, "The situation in Syria does not affect the Iraqi economy or the dollar exchange rate in the local market ."
He added that "the dollar exchange rate in the parallel market is currently stable, noting that the government is working to reduce the gap between the parallel exchange rate and the official rate to achieve greater economic stability ."
Currency markets are witnessing significant changes with the “sudden” rise in the value of the Syrian pound against the Iraqi dinar .
What is the secret of the dollar's stability in Iraq despite regional tension? A government advisor explains
Saleh told Al Furat News Agency: "There is a reason for the stability of the exchange rate in the parallel market, contrary to expectations, as it stems from the Central Bank of Iraq's completion of the compliance platform and the complete shift to foreign currency reinforcement in international banks corresponding to national banks, which now covers the market's needs for foreign currency to finance the private sector's foreign trade at the official exchange rate of 1,320 dinars per dollar."
He explained that "the period of anticipation and anxiety about the transition to the new situation has been absorbed by the ability to successfully and smoothly finance trade and other transfers through the direct relationship between the Iraqi bank and its correspondents abroad, reinforced by foreign currency that is purchased at the official price for customers to finance their trade, especially import trade, without rejection or disruption as was the case during the work of the platform."
The dollar is currently sold in local markets at an exchange rate of 1,500 dinars, or 150,000 for one hundred dollars.
Iraq loses control of the dollar
The exchange rate of the dinar against the dollar has been fluctuating for years without any control by either the Iraqi government or the Central Bank of Iraq, according to economic experts, who attributed this fluctuation to the failure to find real radical solutions to this problem and the failure to take strict measures against manipulators.
The exchange rate of the US dollar against the Iraqi dinar recorded an increase with the closing of the two main stock exchanges in Baghdad, Al-Kifah and Al-Harithiya, today, Monday, to record 151,000 dinars for 100 dollars, while this morning it recorded 150,500 dinars for 100 dollars.
Shafaq News Agency correspondent indicated that selling prices in exchange shops in local markets in Baghdad rose, as the selling price reached 152,000 dinars for 100 dollars, while the purchase price reached 150,000 dinars for 100 dollars.
In this context, economic expert Mustafa Faraj said, “The fluctuation of the dollar price for years is due to the banking policy followed by the Central Bank and the Iraqi government and the timid solutions they offer that are not commensurate with the size of the problem. This is why it is noted that they have not controlled the dollar price so far.”
Faraj explained to Shafaq News Agency, "One of the most important reasons for the rise in the dollar price is the lack of coverage for trade exchange with Iran and Syria, which are subject to US sanctions and Iraq is not allowed to transfer dollars to them, so the dollar is smuggled to the two countries, which causes its prices to rise."
Faraj stressed that "the prices of food, basic materials, and even the labor market and trade are all affected by the prices of the dollar, and when its prices rise, the prices of basic materials, food, and others rise, and this is all due to the failure to find real radical solutions to this issue and the failure to take strict measures against manipulators.
same article but this is new info
New reasons
In addition to the previous reasons, there are other new reasons, as the economic researcher, Ahmed Eid, attributed the increase in demand for the dollar and its withdrawal from the markets and thus the rise in its prices, to the fact that “the change in Syria has caused damage to the interests of many militia leaders and influential people, amid fears of targeting Iranian interests and influence in Iraq, which led to a great increase in demand for the dollar and its withdrawal from the markets by these influential people through their economic arms that control wide joints of the market, in order to search for new outlets to market their illegal activities.”
He continued during his talk to the agency: "The impact of the closure of the borders with Syria on the Iraqi market has prompted a large number of traders to search for new sources of supply such as Egypt, Turkey and other countries, which requires the need for cash liquidity in dollars to cover the market's needs."
Eid warned that "there is a major operation targeting the Iraqi economy, which is the smuggling of currency abroad and money laundering operations that are still ongoing until now, and these are all reasons that have led and will lead to an increase in the dollar exchange rate in the Iraqi market."
The "platform" effect
Regarding fears of the dollar rising after the electronic platform is terminated, economic expert Ahmed Abdel Rabbo said, “The Central Bank will stop working on the platform it created in 2023, and the dollar transfer process will be limited to (foreign banks) and those who have correspondents, and this is an injustice to local Iraqi banks that have begun laying off their employees.”
Abdul Rabbo told Shafaq News Agency, "There are 4 banks that will eliminate Iraqi banks and will control and dominate the Iraqi banking sector, and will control the remittance market and control the dollar exchange rate, so its prices are expected to rise in the future," calling on the Central Bank to "guarantee Iraqi banks in the US Federal Reserve and the Treasury Department, and to help Iraqi banks to have accounts in (JP Morgan) and (Citibank)."
The Central Bank reassures
It is noteworthy that the Central Bank of Iraq announced on September 4, 2024, the mechanism for ending the work of the electronic platform for foreign transfers of hard currency, while reassuring that there are no potential impacts on the exchange rate and transfer operations after the platform’s work is terminated.
According to a statement by the Central Bank, received by Shafaq News Agency, the electronic platform for foreign transfers managed by the Central Bank of Iraq began at the beginning of 2023 as a first phase to reorganize financial transfers in a way that ensures proactive oversight of them instead of subsequent oversight by the Federal Reserve auditing daily transfers.
According to the statement, it was "an exceptional measure as the Federal Reserve does not usually do this, and a gradual shift was planned towards building direct relationships between banks in Iraq and foreign correspondent and approved banks, mediated by an international auditing company to conduct pre-audit of transfers before they are executed by correspondent banks."
He continued: "During the year 2024 and until now, 95% of the transfer process from the electronic platform to the mechanism of correspondent banks directly between it and Iraqi banks has been achieved, which means that only about 5% of it remains within the platform, which will be transferred using the same mechanism before the end of this year and according to the plan."
The statement of the Central Bank of Iraq indicated that some expectations about possible effects on the exchange rate and transfer operations are baseless, because the process will not be sudden or in one payment at the end of this year, but rather it was achieved in the past period with effort and careful follow-up, except for the remaining small percentage that will be accomplished in the coming short period.
The bank confirmed that trade with the UAE, Turkey, India and China represents about 70% of Iraq's foreign trade as (imports), which prompted the Central Bank of Iraq to find channels for transfer in euros, Chinese yuan, Indian rupees and UAE dirhams, through accredited correspondent banks in those countries.
He added in this regard: "(13) Iraqi banks have actually begun conducting transfer operations with the prior audit mechanism that has been agreed upon and approved in addition to transfers in dollars, with the provision of channels for personal transfers for legitimate purposes and external purchases through electronic payment channels and international money transfer companies and cash sales to travelers, and the payment of cash dollars for incoming transfers to the parties and purposes specified in the Central Bank's published instructions."
The bank noted that it has placed foreign transfer operations and meeting dollar demands on sound paths consistent with international practices and standards and the Anti-Money Laundering and Terrorist Financing Law.
The Central Bank’s statement concluded that “providing the aforementioned channels for all purposes at the official dollar price makes this price the true indicator of economic practices, which is proven by the reality of price stability and control of inflation. Any other price traded outside of these channels is an abnormal price that those with unorthodox or illegal practices resort to, who avoid official channels in their dealings, and bear the additional costs alone by purchasing at a higher price than the official price to deceive others about the difference between the official price and the other.”
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