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The "currency auction" is a window for smuggling billions of dollars annually to Iran and its militias, and nothing benefits the Iraqi economy

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December 2020 | 1:13 AM
The Baghdad Post

The "currency auction" is a window for smuggling billions of dollars annually to Iran and its militias, and nothing benefits the Iraqi economy

The Central Bank of Iraq sells about 200 million dollars a day to the local market

$44 billion went out of Iraq through the currency auction in 2019, of which $0 billion did not know its destination and no goods were brought in

The corruption of the "currency auction" in Iraq is still one of the economic farces over the past years. The corrupt Shiite government invented it to make corruption whales through it and preserve permanent resources for Iranian gangsters and militias in Iraq.

In the year 2019, the Central Bank of Iraq sold $44 billion in hard currency at the Central Bank auction, mostly intended to cover the import of materials and goods the country needs, stabilize the price of the Iraqi dinar and prevent inflation, according to data from the bank.

However, according to Iraqi economists, the volume of Iraqi imports reached 18 billion dollars, of which "6 billion dollars" were bought by the Iraqis of goods from Iran, according to the economist Manar al-Obeidi. Iraqi experts warn of "currency leakage" outside Iraq due to "corruption" in the currency auction in the country.

According to a report by Al-Hurra, Manar Al-Obaidi said, "There is actually a difference of about $30 billion between the volume of transfers abroad and the value of the goods entering, which indicates that the currency auction is not doing its proper duty to provide funds for the purpose of import."

The Parliamentary Finance Committee had called on the words of a number of its members to "reconsider the issue of the currency auction."

A member of the committee, Ahmed Al-Saffar, said in a statement to the official Iraqi agency that "the issue of the currency window of the central bank does not exist in all countries of the world except for Iraq."

A member of the Finance Committee, Muhammad Sahib Al-Darraji, announced in a statement, on Monday, that he "submitted an official complaint to the Iraqi judiciary to stop the waste of hard currency and its smuggling abroad" through the currency auction.

A journalist interested in Iraqi economic affairs, Bassem Al-Shara, said that the currency auction has become a major obstacle to the liberalization of the Iraqi economy and is merely a front for financing currency smuggling operations, especially this year after revenues from crude oil have declined significantly.

Al-Shara added that the auction sells large numbers of dollars a day that exceeds the needs of the Iraqi economy and does not return from them as goods except at rates that do not exceed 40 or 50 percent in the best case, and the rest goes to neighboring countries, especially Turkey and Iran.

The bank sells the US dollar at 1182 dinars for every dollar, but the exchange rate in the Iraqi market is about 1250 dinars per dollar, and exchange companies benefit from the currency difference.

But Salem al-Douri, a businessman from Baghdad, says that "the central bank sells about $200 million a day in currency, which is much greater than the Iraqi market’s consumption or its need."

Al-Shara said, "The Turks and Iranians talk about large exports to Iraq, but the ministries of agriculture, government agencies, and even private sector traders do not know the fate of these goods, and thus they are statements of misleading and smuggling of dollars."

According to Sharia, "keeping the price of the Iraqi dinar subsidized against the dollar serves the two countries and does not serve the Iraqi state and its industrial and agricultural production, which makes it more expensive to support the dollar than the importer," thus making Iraq a market for the two countries that suffer from the collapse of their currency.

And the currency auction serves its current form, according to Sharia, "many banks belonging to influential parties and gives them important profits with which they can face the interruption of financing, especially since the selling differences are large between the bank and the banks."

Although critics of the auction (the window) say that it turned the central bank into a "money exchange company", which is recognized by the central bank in a paper it issued in 2019 regarding the auction, when it compared proposed solutions to develop the auction work and reduce its damages.

The bank admits in the paper that the auction consumes effort and time that the bank was supposed to spend in supporting the Iraqi market and performing its real role,

but the paper also said that it is not possible to completely cancel the auction, because this will cause great inflation in the Iraqi market, and also it is not possible to convert it In the custody of the Ministry of Finance or the Iraqi stock market due to "the lack of experience and the restrictions of the US Federal Bank) according to the paper.

The economic expert, Salam Sumaisem, says that“ the rule of exchange liberalization requires the existence of a window for selling the currency, ”and she adds that any blocking of currencies will make the dollar price higher and this is not desirable.

But Sumaisem criticizes the "lack of jurisdiction" among those in charge of Iraqi monetary affairs, and says that it is possible to develop the auction work in a way that reduces the rate of leakage in hard currency outside the country.

The economic expert, Manar Al-Obaidi, confirmed, according to Al-Hurra, that it is not possible in any way to cancel the currency auction because 92 percent of the Iraqi state's imports are in US dollars and the Iraqi state must sell dollars to the central bank, and the central bank must secure the necessary Iraqi dinar to give it To the Iraqi government in exchange for selling imports of dollars.

Al-Obaidi adds that the solution to reducing the impact of the auction is through maximizing the state’s revenues from the Iraqi dinar and providing local substitutes for the necessary imports.

Al-Obaidi takes on the current financial system not to link the central bank transfers to the customs authority to see if the funds transferred abroad through auction enter Iraq in the form of goods.

Businessmen, such as Salem al-Douri, criticize the bank’s auction, which he says allows Iraqi money to be taken out of hard currency to buy non-essential items.

Al-Douri calls for floating the dinar and adopting the "difficult solution" in order to save the Iraqi economy.

Al-Douri calls for floating the dinar and adopting the "difficult solution" in order to save the Iraqi economy.

Late last year, the Integrity Commission revealed details of criminal cases related to the "currency auction" file that it is investigating, and talked about three different "tricks" used by government banks, including using people’s accounts without their knowledge and depositing checks for others who do not have a balance.

According to the Integrity Commission, the cases included private and government banks, some of which claimed to have imported goods inside Iraq, but "no material has entered Iraq since 2004," according to the commission's statement.

According to "Independent Arabia", the basic idea of the currency auction revolves around "selling dollars to private banks and money transfer companies to manage the import of goods."

Its daily sales of dollars reach the limits of $180 million, but several suspicions affect influential political figures standing behind those banks to run Corruption operations.

The Treasury Department had included Iraqi banks - dealing with the auction - in the sanctions list on more than one occasion.

Economists describe the currency auction as "a drain on the dollar and an opportunity for some banks owned by influential parties to make big profits."

And a professor of political economy at the Iraqi University, Abdul Rahman al-Mashhadani, says, Iraq has become a gateway to relieve pressure on Iran.

It revealed "the entry of non-Iraqi banks into the currency outlet, including Lebanese and Iranian banks that obtain daily quotas estimated at 5-8 million dollars."

He points out that “Iraq's commercial dealings with Iran are not done through the banking system due to the sanctions imposed on it, and most transactions are done through direct payment,” indicating that

“several evidences for this, including very inflated numbers regarding the import of roses, tomatoes and watermelons at inflated prices It exceeds the needs of Iraq."

On the money laundering operations that mar the currency auction sales in the Central Bank, Al-Mashhadani estimates that the money laundering proceeds from the daily sales of the Central Bank are about 15 percent, indicating that

"the talk about currency auction being a gateway to corruption and money laundering abroad has been taking place since 2010."".

He adds, "influential political parties standing behind the banks that own shares of the auction have also become outlets for merchants' transfers, and a percentage of them are affected by money laundering operations."

In summary, the currency auction is a gateway to smuggling billions of dollars annually to Iran and its militias, and Iraq does not benefit from it.

The economic and financial deterioration is clearly visible, and economic plans must be developed to eliminate this chaos completely.
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