The visit of Iraqi Prime Minister Muhammad Shiaa Al-Sudani to the United States of America is significant because it coincides with the problem of the rise in the dollar exchange rate, amid strong hopes among Iraqis for the prospect of finding solutions to this issue.
Al-Sudani left for New York to attend the United Nations General Assembly’s seventy-eighth session, where he met on the sidelines with US Secretary of State Anthony Blinken, who was issued an official invitation to visit the White House by US President Joe Biden.
This comes at a time when the dollar exchange rate in Iraqi local markets has seen erratic surges, approaching 160 thousand dinars for 100 dollars, for internal and external causes, according to experts.
According to Firas Al-Muslimaoui, a member of the Iraqi House of Representatives, “the House of Representatives hosted the Governor of the Central Bank following the rise in the dollar exchange rate, and he explained that the reasons for the rise are due to internal and external factors.”
Internal variables
“Internal factors include those related to merchants evading taxes and purchasing dollars from the black market, and among them are administrative obstacles, some of which require those who take dollars to register,” Al-Muslimaoui told Shafaq News Agency.
“The Central Bank sought to address these obstacles, and decided to allow individuals, rather than corporations, to buy dollars if they supply goods, provided that they are committed to ensuring that the goods are of the country’s need, real, and have official receipts,” he continued.
According to Al-Muslimaoui, the third aspect is that “the Central Bank submitted a proposal to the Prime Minister to reconsider the tax rate imposed on existing goods and reduce it, in order to encourage merchants to buy through official methods.”
“The fourth factor is smuggling,” he continues. Security is in place, and big groups have been apprehended for smuggling cash out of Iraq.”
External variables
According to the spokesman, “external factors are related to US Treasury policy, and these are outside the management of the Central Bank, so the dollar exchange rate is expected to be one of the issues that the Prime Minister will discuss during his current visit.”
Al-Muslimaoui predicted at the end of his address that “the dollar exchange rate will witness a gradual decline over the next few days, in a way that does not affect the Iraqi market.”
Constant increase
Ahmed Fouad Shukri, a financial affairs expert, feels that “the dollar will continue to rise due to the government not taking real measures to curb its rise, but rather was content with some preventive or precautionary measures.”
“The government banned dealing in the dollar within the local market, and it succeeded to a certain extent,” Shukri explained to Shafaq News Agency, “but a large percentage of Iraq’s imports come from neighboring countries that are subject to American sanctions, such as Syria, and a number of Turkish and Iranian companies that are completely banned from dealing in the dollar, and they did not comply.” So far, the government has built a distinct structure for economic exchange with these countries, as well as for purchase and payment operations.”
“There are other factors that the government did not pay attention to, such as the country’s high budget, which leads to fears and bad and negative expectations, high inflation, and Iraq’s foreign debts,” he says. These are all reasons that lead to the local currency’s depreciation versus foreign currencies in general, and because Iraq is tied to… in dollars, this rise is unavoidable.”
“In addition to the main and most important reason, which is the American sanctions that have led to the recent rise in the dollar, there are sanctions that may be more severe and may affect the Central Bank of Iraq, through which a major shock could be exposed, and also with regard to financial transfers that have become confined to the hands of the American Federal Reserve, which “The risks to the Iraqi government have increased significantly,” he continues.
