Baghdad – Although it has been about 3 years since the start of the electronic platform to monitor the movement of the dollar, The exchange rate of the dinar against the US currency is still living There is a significant discrepancy between the official price announced by the Central Bank, which is 1,320 Iraqi dinars per dollar, and the black market price, or what is known as the parallel price, which ranges between 1,490 and 1,510 Iraqi dinars per dollar.
At the beginning of 2023, Iraq announced the adoption of an electronic platform to monitor the movement of dollar sales and money laundering operations, after warnings issued by the Federal Reserve (the US Central Bank), in addition to the US Treasury Department punishing several local banks for their involvement in suspicious activities.
The work of the electronic platform for foreign transfers managed by the Central Bank of Iraq, in its first phase, is based on reorganizing financial transfers in a way that ensures proactive control over them instead of subsequent control through the Federal Reserve auditing daily transfers.
On February 7, 2023, the Iraqi Council of Ministers approved the decision of the Board of Directors of the Central Bank of Iraq to adjust the exchange rate of the dollar against the dinar, equivalent to 1,300 dinars per dollar, after it was 1,480 dinars per dollar.
On the fourth of this month, the Central Bank of Iraq announced the imminent termination of the “electronic platform” through which US dollar transfers abroad are carried out, indicating – in a press statement – that during the year 2024 and until now, 95% of the transfer process has been achieved from the electronic platform to “corresponding banks”, which means that only about 5% of it remains within the platform, which will be transferred using the same mechanism before the end of this year and according to the plan.
This decision by the Central Bank raised many questions about the extent to which Iraq was able to prevent the smuggling of hard currency, stop money laundering operations, and the extent to which economic measures succeeded in controlling currency smuggling and controlling the price in the market.
Winners and Losers from Exchange Rate Fluctuations
Abdul Hassan Al-Ziyadi, a member of the Board of Directors of the Iraqi Businessmen Union, confirmed that the primary beneficiaries of the fluctuation in the exchange rate of the dollar against the dinar in Iraq are currency smugglers and price speculators, adding that the primary victims are Iraq and the citizen.
Al-Ziyadi said – in an interview with Al Jazeera Net – that “the dollar crisis in Iraq has affected all aspects of commercial and non-commercial life.”
He added, “Traders were harmed by the rise in the dollar exchange rate, and citizens were also harmed because the instability of the exchange rate destroys the family’s income and monthly income.”
He continued, “If Iraq wants to be freed from this confusing situation, it must first get rid of the import of many goods and rely on manufacturing them locally to reduce the need for hard currency, in addition to developing agriculture.”
He considered that “the Iraqi government and the Central Bank are primarily responsible for the failure of the currency selling platform.”
draining money
Economic researcher and member of the General Authority of the Iraqi Accountants Syndicate, Hussein Nima Al-Karaawi, pointed out that Iraq’s entry into the American “SWIFT” system in 2023 was a reason for many traders to refrain from the currency selling platform and turn to the black market for fear of having their money seized, in addition to the lack of mechanisms to help traders avoid having their money seized.
Al-Karawi told Al Jazeera Net that “the price difference between the dollar and the dinar in the official or parallel price exceeds 17 points for one dollar, so what about the very large amounts?” He considered that “this matter represents a drain on funds.”
He added that “sales have declined significantly in Iraq due to the change in the exchange rate and the lack of real control over exchange rate fluctuations in the market,” explaining that the reason is due to the presence of border crossings outside the government’s control that are exploited by some dollar smuggling gangs.
Al-Karawi said, “The citizen is the one who pays the tax of the exchange rate fluctuations. Although the financing for imported goods is through the platform at the official price, in reality, many goods and commodities are sold in the local market at the parallel dollar price.”
He said that the platform used to sell up to $280 million per day, but the amount has now dropped to less than $240 million per day, adding that the difference between the two amounts goes to smuggling and the parallel market.
Al-Karawi stressed that “the government and the Central Bank have taken many measures internally and externally to control the smuggling process and control the exchange rate.”
He explained that some banks were harmed by the ban imposed on them by the US Federal Reserve and by smuggling operations, which contributed to raising the exchange rate on the black market. He also indicated that reducing the exchange rate of the dinar against the dollar also harmed the government’s revenues, because its revenues depend on selling oil and receiving dollars in exchange for it, then selling it on the official platform for banks and traders.
Border crossings control
Baghdad Chamber of Commerce spokesman Rashid Al-Saadi said that controlling border crossings and automating departments concerned with import and export are the only way to control currency smuggling.
Al-Saadi told Al Jazeera Net, “There are parties that tried to sabotage the currency selling platform in order to benefit from illegal transfers.”
He added, “Iraq lost large sums of money as a result of smuggling of goods and hard currency and tampering with the valuation of goods at border crossings.”
As for citizen Ahmed Jabbar, who owns grocery stores, he called on the Iraqi government to support the economy and enhance the purchasing power of citizens by strengthening the local currency and supporting local industry and agriculture.
Jabbar told Al Jazeera Net, “Selling in dollars has affected the Iraqi market. We encourage the government to limit dealings in the local currency, as it contributes to the stability of the market and the economic situation of citizens.”
