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The dollar in Iraq.. America is tightening and the market is on fire

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The dollar in Iraq.. America is tightening and the market is on fire

economy     breaking     Iraqi economy     dollar exchange rate
2023-07-24 05:02

Shafaq News/
The Iraqi dinar recorded a significant decline against the dollar on the Baghdad and Erbil stock exchanges, just a few days after the imposition of US sanctions against 14 private banks, due to violations related to their dealings with entities that Washington imposes sanctions on, most notably Tehran.

While economists and financial experts describe the Central Bank's procedures as "timid", they put forward proposals for solutions that must be resorted to to "adjust" the price of the dollar.

Shafaq News Agency revealed the names of these banks locally in Iraq, which are the "Islamic Advisor for Investment and Finance", "Al-Qartas Islamic Investment", "Al-Taif Al-Islami", "Elaf Bank", "Erbil Investment Bank", "International Islamic Bank", "Trans-Iraq Bank", "Mosul Bank for Development and Investment", "Al-Rajeh Bank", "Sumer Commercial Bank", "International Islamic Trust Bank", "Ur Islamic Bank", "Islamic World Bank", and "Zain Iraq Islamic Investment Bank". and financing.”

The US decision comes after a similar decision several months ago, in which several similar banks were placed on the sanctions list, namely, "Al-Ansari Bank", "Middle East", "Al-Qaqed" and "Asia".

Low cash sales

"The four previous banks that were punished and the 14 that followed were a reason to raise the price of the dollar, because in all cases they have a presence in the local market, and

it is not possible to ignore these banks and this volume of work," said economist and professor of economics at the Iraqi University, Abdul Rahman al-Mashhadani, in an interview with Shafaq News agency.  The expert points out that

"these penalized banks share 8 percent of the currency window for the purpose of external transfers, and

this percentage means 16 million dollars from the window's sales for foreign transfers,

but its share is large for cash sales, as it is noticeable in the Central Bank's cash sales to the parallel market that it decreased from 40 or 60 million dollars to reach 17 million dollars."  Al-Mashhadani explains that

"to solve the problem of high prices, the central bank must compensate the share of the penalized banks by giving it to other banks and exchange companies.

There are 38 banks that enter the currency window out of 72 banks, and

therefore the bank must introduce other banks to the currency sale window, whose classification did not qualify them for currency penetration because it is weak."  And he continues,

"The second measure is that the sanctions came as a result of cash sales that go to the parallel market, and the merchants seize them to finance their trade with the banned country, and Iran is at the top of this list."

Shy measures

For his part, financial and economic expert Hilal Al-Taan said in an interview with Shafaq News agency,

"There are many reasons for the rise in the price of the dollar,

including the presence of speculators who own quantities of dollars, and thus manipulate the market as they please.

The US sanctions on the 14 banks also affected the exchange rate rise."  Al-Taan adds that

"citizens are afraid of a collapse of the Iraqi currency, which made them keep the dollar, and

thus increase the demand for the dollar, in addition to the unstable political and security reasons."  Al-Taan shows that

"the government has taken many measures, for example opening windows through banks, and increasing the share of travelers from 2,000 dollars to 3,000 dollars,

but these measures are still shy and weak and do not meet the demand, as

the government is supposed to take strict measures with dollar manipulators and the

central bank to take a financial package to reduce the demand for dollars," stressing "the

need for the government to take quick measures because the slower it is in its procedures, the more there will be a new rise in the dollar exchange rate."

We were affected by the rumours.

An owner of a money exchange in Baghdad said, in an interview with Shafaq News agency,

"The exchange rate of the dollar is greatly affected by rumors, especially after the US Federal Reserve sanctioned 14 banks."  He adds that

"cash sales that the bank finances to the parallel market through banks have decreased by 35 to 40 million dollars, which affected the dollar money supply in the parallel market."

Bank actions to limit the rise in the dollar

The Central Bank took measures to limit the rise in the price of the dollar today, Monday, by allowing “class A and B” exchange companies to open deposit accounts with the bank in dinars and dollars, and to participate in the currency buying and selling window.

The Wall Street Journal, quoting US officials, said that the move came after information was revealed that the targeted banks were involved in money laundering and fraudulent transactions.

The US Treasury and the Central Bank of Iraq have previously imposed strict controls on cash transfers carried out by Iraqi banks since the beginning of last January, in an attempt to reduce money laundering and smuggling,

but smuggling operations witness a variety of ways and means of exiting the currency.

During the past two days, the exchange rates of the US dollar against the Iraqi dinar increased dramatically, in the Baghdad markets, and in Erbil, the capital of the Kurdistan Region, to reach 155 thousand dinars per hundred dollars, after Washington imposed sanctions on 14 Iraqi banks, in a crackdown on Iran's dealings in dollars.

The official exchange rate is 1,320 dinars to the dollar in the Iraqi budget.

As a result, the Finance Committee in the Iraqi Parliament hosted, today, Monday, the Governor of the Central Bank, Ali Al-Alaq, and also to discuss the bank’s procedures for stabilizing currency prices.

The Deputy Governor of the Central Bank, Ammar Hamad, told Shafaq News agency,

"The Central bank's main goal is to achieve stability in the exchange rate of the dollar against the Iraqi dinar." explaining that

"the central bank provided the electronic platform to save dollars for buying goods and services from abroad."

Hamad expressed his surprise that "merchants or citizens go to the market to buy foreign currency at a price that is a big difference from the official rate," noting that

"the Central Bank provided the dollar at an official rate, but within the uses of the private sector is the purchase of goods and services from abroad."  The Deputy Governor of the Central Bank pointed out that

speculative operations in the market have caused a rise in the exchange rate of the dollar now, and

it will be returned to the previous price soon.”

Almost since the beginning of this year, the Central Bank of Iraq launched a working mechanism in an electronic platform and the international financial transfer system "SWIFT",

but this did not help the dollar exchange rates to stabilize in Iraq,

despite the attempts of the government and the central bank to control the exchange rate in the parallel (black) markets.


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