Experts revealed that the secret behind these fluctuations is that Iraq began complying with international procedures on financial transfers in hard currency, while parties in the country held Washington responsible for this decline.
And while the official fixed exchange rate is 1470 dinars against one dollar, the price of the dinar in the market declined since mid-November to 1600 dinars at the beginning of the week, before settling at about 1570, according to the official news agency, meaning that the Iraqi currency lost about 10 percent of its value.
This decline is not considered huge, but it has begun to cause concern among Iraqis about the high prices of imported materials, such as gas and wheat, for example.
Adviser to the Prime Minister on Financial Affairs Mazhar Salih says, in a report to AFP, that the “fundamental and fundamental reason” for this decline “is an external constraint.”
But some Iraqi politicians believe that the United States is behind this volatility.
Hadi al-Amiri, head of the Al-Fateh Alliance, representative of the Popular Mobilization Forces, which includes pro-Iranian factions affiliated with the country, accused, in a statement on Tuesday, the Americans of exerting “pressure on Iraq to prevent its opening up to Europe and the countries of the world.”
And he considered that the Americans are using “the dollar as a weapon to starve people.”
On the other hand, economist Ahmed Tabakishli believes that “contrary to rumors and misinformation, there is no evidence of American pressure on Iraq,” the important economic and commercial partner of neighboring Iran.
“shock”
In fact, the volatility of the dinar is linked to the start of Iraq’s compliance with some standards of the international transfer system (SWIFT), which Iraqi banks must apply since mid-November to access Iraq’s dollar reserves in the United States.
In order for Iraq to be able to access those reserves, which amount to $100 billion, it must now comply with systems that “require compliance with international anti-money laundering provisions, anti-terrorist financing provisions, and those related to sanctions, such as those applied to Iran and Russia,” according to Tabakishli.
He adds that the matter is related to Iraq entering “within a global financial transfer system that requires a high degree of transparency,” but that “caused shock” to many Iraqi banks “because they are not used to this system.”
Mazhar Salih explained that Iraqi banks should now record “their (dollar) transfers on an electronic platform, check the requests … and the US Federal Reserve examines them, and if it has doubts, it stops the transfer.”
Since the restrictions began to be implemented, the Federal Reserve has refused “80 percent of requests” for remittances to Iraqi banks, according to Salih, due to doubts about the final destination of those funds being transferred, he said.
“temporary condition”
This refusal affected the dollar supply in the Iraqi market. On the other hand, demand accumulated, but the supply was not consistent with it, and thus the exchange rate declined with the decline in bank transfers in dollars.
The Central Bank of Iraq spoke in a statement on Tuesday about the return of the exchange rate to what it was within two weeks, describing the “turmoil in dollar prices” as a “temporary situation.”
In the meantime, the Iraqi authorities have taken measures, including facilitating the financing of private sector trade in dollars through Iraqi banks, and opening outlets for selling foreign currency in government banks to the public for travel purposes.
The Council of Ministers also decided to “commit all government agencies to sell all goods and services inside Iraq in dinars and at the central bank’s price of (1470) dinars to one dollar.”
Mazhar Salih believes that “these measures are important because they show that the state is there to protect the market and the citizen,” and help “to fend off the problem.”
Despite the dinar’s decline, the inflation rate is still small, reaching 5.3 at an annual rate in October 2022, according to the Ministry of Planning. However, actual concerns relate to the purchasing power of the population.
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