4 reasons for Iraq from float full work .. Learn
The decision to reduce the value of the Iraqi dinar against the dollar raised concerns that this paves to float full local currency
The dollar exchange rate was 1470 dinars to the public and 1460 dinars for banks, compared with 1182 dinars before the reduction (Reuters)
The Central Bank's decision to reduce the value of the Iraqi dinar against the dollar by 24% with the end of 2020 with a better management of payments and for the economic crisis of the country, to raise fears that this paves to float the whole local currency.
The dollar's exchange rate was 1470 dinars to the public and 1460 dinars for banks operating in the country, compared to 1182 dinars before reducing.
The Iraqi economy suffers from a contraction of 11% in 2020, exacerbating the economic weaknesses for a long time, according to the International Monetary Fund in a recent report.
Iraq is 92% of its income on oil revenues; The last time the dinar was reduced in December 2015 when the dollar was raised to 1182 dinars for 1166 dinars in the past.
As the economic difficulties witnessed by the world as a result of Corona pandemic and the emergence of new strains, some believe that the use of Iraq to floats is an acceptable option.
The floating policy is not a real benefit in the economy of Iraq, which is a legitimate economy, depends on oil revenues significantly, says Economic expert Manar al-Obeidi.
Diversification of the economy
Obeidi points out that the full float policy requires diversification of the economy to create a state of balance in supply and demand, this is difficult in Iraq for only one player in this equation, the Central Bank of Iraq.
He confirmed that the reduction of the dinar had recently led to the high level of inflation to 4%, due to reflection of exchange rate differences and imports costs, on the final consumer.
The annual inflation rate in December 2020, rose 3.2% on an annual basis, affected by changing the dollar exchange rate.
Obeidi predicted the continued rise of consumer prices for subsequent months and believes that "the future of the dinar is expected to maintain its price within the 1500 limits for more than a year, and if the economic situation is improved, it is possible to raise the value of the dinar."
In turn, Industrial Development and Investment Consultant Amer Jawahirah ruled up a full float until 2022, because of its political and social repercussions that are difficult for Iraq's economic and political reality.
Jeweler added that the full float would have negative implications for the purchasing power of the Iraqi consumer, especially middle and poor groups.
Once if the country has resorted to floating, Jeweler sees it once again, and not hot, especially that the central bank is giving foreign currencies for those wishing, and therefore is the only one who is able to maintain the value of the dinar.
In February, Iraqi Central Bank reserves from foreign currency exceeded $55 billion, according to him.
The reality of financial and administrative corruption is the difficulty of applying full floating and achieving its objectives, leading to failure and even further deepening the crisis for the economic scene.
The force of law
The economic expert Osama Al-Tamimi believes that floating is supposed to stimulate GDP and reduce reliance on import, "but corrupt will face this mechanism to raise domestic commodity prices."
He pointed out that it is difficult to trend to a comprehensive float, for what he needs from a state that has the force of law, "This is not now available."
He stressed that the currency reduction was enabled by the government to overcome a major crisis that could have been exposed to Iraq and was able to provide salaries, and manage state matters, and scaled smuggled funds abroad, where the dinar became a weak economic margin of smugglers.