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Is Iraq heading to fully float the local currency?

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2021/04/09 10:15    Readings 337    Section: File and Analysis


Is Iraq heading to fully float the local currency?

Baghdad / Obelisk: Iraq will be forced to float the entire local currency, if the devaluation of the Iraqi dinar against the dollar leads to results that lead to the deterioration of the economy and the inability of the state to cover the expenses.

The Central Bank has reduced the value of the Iraqi dinar against the dollar by 24% with the end of 2020.

The dollar exchange rate reached 1470 dinars to the public, and 1460 dinars for banks operating in the country, compared to 1182 dinars before the reduction.

The economist Osama Al-Tamimi believes, according to Al-Jazeera Net, that the flotation is supposed to lead to stimulating domestic production and reducing dependence on imports, but the corrupt will face this mechanism by raising the prices of local commodities.

He pointed out that it is difficult to move towards a comprehensive float, because of what it needs from the presence of a state that has the force of law, "and this is not available now.

He stressed that the devaluation enabled the government to overcome a major crisis that Iraq could face, through which it was able to provide salaries, manage state affairs, and limit money smuggled abroad, as the dinar achieved a weak economic margin for smugglers.

The floating policy is not of real benefit in the economy of Iraq, which is a rentier economy, which relies heavily on oil revenues, says the economist Manar Al-Obaidi.

Al-Obaidi points out that the full floating policy requires diversifying the economy to create a state of balance in supply and demand, but this is difficult in Iraq because there is only one player in this equation, which is the Central Bank of Iraq.

In turn, industrial development and investment consultant Amer Al-Jawahiri ruled out a full float until 2022, because of its political and social repercussions that are difficult for the Iraqi economic and political reality to bear now.

Al-Jawahiri added that the full float will have negative repercussions on the purchasing power of the Iraqi consumer, especially the middle and poor groups.


Obelisk follow-up - agencies

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