On Monday, knowledgeable sources revealed the details of the meeting between the Ministries of Finance and Planning and the governors, stressing that it was a candid conversation that suggested a “danger” for the Central Bank of Iraq.
In a conversation with “Jarida” , stating that “the real problem is a dinar problem, not adollar problem, because the government sells oil in dollars and delivers it to the central bank, and the latter sells dollars to importers (merchants) so that they can import their goods on the one hand and in order to withdraw the Iraqi dinar from them.”
She continued, “The Central Bank hands over the Iraqi currency resulting from the sale of the dollar to the government represented by the Ministry of Finance in order to spend its budget, and when the Ministry of Finance spends salaries and projects, money will accumulate with merchants and their demand for the dollar will begin, and so the economic cycle will continue.”
“What happened now is that the government owns the dollar (in the central bank) as a result of the sale of oil,” she explained. However, due to American prohibitions, the central bank is unable to sell it to merchants.”
“If we track the volume of the Central Bank’s dollar sales during the current year from its beginning to the present, we find that the total of what was sold does not cover the salaries item only in the budget, and this means a number of things, the most important of which is that the Central Bank has purchased the dollar and covered the difference from its cash stock of The dinar, which is about to expire,” she continued.
“During the coming period, the Central Bank will be faced with a difficult and dangerous choice, which is to print more Iraqi dinars and pump them into the market,” the sources said. This will boost the money supply, causing inflation and price increases.”
She went on to say, “The other matter is that the government will not be able to implement its (explosive) budget by financing projects in all governorates due to the lack of liquidity, and this matter is clear from the governorates’ complaints about the lack of funding, which is best confirmed by the Finance Committee’s meeting with the governors.”