An unprecedented rise in the price of the dollar in Iraq. What do US sanctions have to do with it? | economy

Iraq’s currency auction remains one of the country’s most ambiguous economic records, as many Iraqi politicians and economists see it as a drain on hard currency and one of the gateways for smuggling stolen or corrupt money.

The sale of the Central Bank of Iraq, or what is known locally as the currency sale auction, has witnessed great turmoil in recent weeks, after the auction witnessed a drop in currency sales of between 40% and 50%, which economists see as linked to the rise in the dollar exchange rate on the parallel ( black) markets. ) which led to an increase in the exchange rate to more than 1,500 dinars per dollar, at a time when the Central Bank sells one dollar for 1,460 dinars. .

Oscillations in the dollar exchange rate on the black market led to turmoil in the country’s trade movement, which contributed to the rise in consumer prices, which raises many questions about the reasons for the high exchange rate and its connection. by the actions of the Central Bank of Iraq and preventing several banks from entering the auction of the sale of currency after the warning of the Ministry of Finance.American.

Many reasons

In recent weeks, the Central Bank of Iraq excluded 4 private Iraqi banks from the currency auction (namely: Al-Ansari, Al-Sharq Al-Awsat, Al-Qabid and Asia) following directives and warnings from the US Treasury Department about these banks accused of currency smuggling .

The Central Bank of Iraq, for its part, justified a few days ago the reasons for reducing the sales volume of the foreign exchange sales window by the bank’s transition to the establishment of a new electronic platform for the sale of dollars and foreign remittances, given that some banks are not sufficiently ready to enter the automation that launched their experimental work.

Financial expert Mahmoud Dagher also goes in this direction, who adds to Al-Jazeera Net that the reason is the suspension of 4 Iraqi banks from entering the auction for the sale of currency as a result of international sanctions due to accusations of corruption, with the start of the Central Bank of Iraq’s new audit method and the new Swift transfer system. In a manner similar to the global system, which requires accurate data on foreign transfers, which has led to the return of many transfers and local banks have reduced the purchase of large amounts of dollars due to these harsh measures.

For his part, economist Safwan Qusai believes that it is clear that there is a high demand for the dollar in the parallel market far from the currency sale window, which confirms the entry of new procedures for the sale of currency at the Central Bank. Iraq, which prevented those in possession of what he described as “illegitimacy” from entering the currency-selling storefront, he said.

In an interview with Al-Jazeera Net, Qusai explained that the drop in the amount of dollars sold at the currency auction indicated that these banned banks were acquiring almost 40% of dollar sales from the central bank, stressing the need for private banks to investigate Iraqi money before buying. dollars to Protect yourself from the new procedures of the central bank.

anti-corruption

Meanwhile, Amer Al-Jawahiri, an industrial development and investment consultant, believes that Central Bank sales are now half of what they were a month ago, with demand for the dollar increasing, indicating a lack of confidence in Iraq’s economic reality, which described as “pitiful”, concluding that the president showed the Minister, Muhammad Shia al-Sudani, and those around him, attended a press conference to reveal the details of the theft of tax money a few days ago, which made many Iraqis feel distrustful , which led to their tendency to buy dollars, according to him.

In his speech to Al-Jazeera Net, Al-Jawahiri indicated that there is another reason presented in the speculation driven by currency traders, from which they extract huge amounts of money without the presence of any accountants or censors, noting that the government’s anti-corruption campaign has forced many owners of illegal funds to hurry to try to get their money out of Iraq quickly to avoid anti-corruption measures, according to Al-Jawahiri.

As for the member of the parliamentary Finance Committee, Jamal Cougar, he believes that the reasons for the decline in currency auction sales and the increase in the exchange rate at the local level are due to the new procedures, commenting: “There are American and European measures against the movement of money in and out of Iraq in order to limited smuggling and money laundering, and limited its access to terrorist groups and militias, and therefore there is a need for ever-increasing amounts of money, which has led to an increase in the demand for dollars on the black market.

Speaking to Al-Jazeera Net, Cougar added another reason related to the massive reconstruction movement inside the country, pointing out that “corrupt” money, after it became difficult to smuggle it abroad, is now being invested at home through investment projects such as housing complexes, hospitals and commercial centers, he said.

semantics

Amidst this, and coinciding with the exclusion of 4 Iraqi banks from the auction for the sale of currency, and the rise in the price of the dollar locally, the governor of the Central Bank of Iraq, Mustafa Ghaleb, confirmed last Sunday his commitment to all international laws and instructions related to the anti-money laundering dossier money and terrorist financing.

The Central Bank of Iraq announced in a press release that last Sunday, the governor of the central bank received Jesse Baker, the assistant deputy secretary of the US Treasury for terrorism and financial crime, and that the two sides discussed cooperation in the application of international standards to combat money laundering and financing of terrorism and the commitment of the central bank to them.

Commenting on what is happening and its implications, Safwan Qusay believes that the central bank should activate the tools of control over banking companies and the parallel market to find out who is working to buy dollars from unofficial outlets, pointing out that the new procedures of the Central Bank of Iraq mean that the Ministry US finance could track banks involved in removing dollars from Iraq without investing in goods or services inside Iraq.

Qusai is not a slave to the fact that countries neighboring Iraq such as Iran, Syria, Lebanon and Turkey, which suffer from difficulties in obtaining dollars, have been inclined to buy some dollars from Iraq and smuggle them through uncontrolled border crossings, especially since the central bank provides the ability to buy cash dollars from the Iraqi headquarters, and that cash sale of dollars amounted to 17 million dollars per day of the total dollars sold to commercial companies and banks.

Course prospects

For more than 3 weeks, the black market in Iraq has witnessed an unprecedented increase in the dollar exchange rate, which raises many questions about the possibility of this increase continuing or declining, which Mahmoud Dagher believes the country will witness in the next two weeks when exchange rates return to normal.

Safwan Qusai also agrees with this proposal, who believes that the rise will not last long, especially since those who dealt with the four banned banks will go to other Iraqi banks, provided the funds are legitimate, at a time when Jamal Cougar rules out further growth exchange rate for a longer period, especially with the new organization that will reduce the chaos that was associated with the coin auction.

On the other hand, Amer Al-Jawahiry believes that it is very difficult to predict whether the growth will continue or not, especially if the increasing demand for the dollar on the black market continues with the decline in sales by the Central Bank of Iraq, which means the continued rise in the prices of consumer goods in country, which directly affects Iraqis. .