The Iraqi government denies any intention to devalue the dinar against the dollar.
The Iraqi Prime Minister's economic advisor, Mazhar Mohammed Salih, denied the government's intention to adjust the exchange rate by devaluing the Iraqi dinar against the US dollar to provide liquidity.
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"Iraq's exchange rate policy is a contractual one between the Ministry of Finance and the Central Bank of Iraq," Saleh said in an interview with Al-Eqtisad News. "This is because the reserves supporting the Iraqi dinar reinforce the external value of the currency, meaning that the dinar, backed by foreign currency, comes from oil revenues."
He explained that "this is called foreign exchange covered by foreign currency," noting that "the last thing the Iraqi government is thinking about is changing the exchange rate, because the policy of changing the exchange rate every so often is bad policy, so it is preferable for the exchange rate to remain officially stable in this manner."
Mazhar Mohammed Saleh believes that "oil is a global commodity that is not affected by the dinar's devaluation, increase, or otherwise. At the same time, this constitutes inflationary financing through deceiving people, and this is not true." He considered the policy of devaluing the dinar to be "dangerous and not easy, while the state is constantly working to raise and improve the dinar's value, not to devalue it."
He stressed that "the right thing to do is to keep the exchange rate as low as possible, unless the economy is exposed to major emergencies, which I don't expect to happen, as long as the economy is oil-based and generates foreign currency flows." He believed that "there are no such plans, neither now nor after the elections, and no one is thinking about this matter in light of the current circumstances and the constants and variables of the current situation."
He continued, "There is no economic policy that tends to fluctuate between depreciation and appreciation of the exchange rate."
He stated that "the exchange rate and the Iraqi dinar have been stable for very long periods, so manipulating the exchange rate is a bad and incorrect policy. The correct policy is to maintain the status quo and thus maintain overall stability so that development, investments, and plans can be sustained."
Mazhar Mohammed Saleh also stated that "the worst type of financing is inflationary financing resulting from the devaluation of the Iraqi dinar, as economic literature suggests, which means deducting from citizens' income by reducing real income to a valueless cash income."
Regarding the easiest ways to address the liquidity shortage, Mazhar Mohammed Saleh explained that "the financial system should be improved by improving revenues."
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