Iraq’s Local Currency Sees Two-month Roller Coaster Ride

Business

January 15th, 6:05am

Asharq Al-Awsat

The dinar's depreciation has sent panic through the Iraqi population, which fears a price surge on imported goods © AHMAD AL-RUBAYE / AFP/File

Iraq's local currency has been on a two-month roller coaster ride following a tightening of procedures for international transfers, AFP reported. While the official exchange rate has been fixed at 1,470 Iraqi dinars against the dollar, the currency was trading at up to 1,600 to the greenback on local markets from mid-November, before settling at about 1,570 dinars, according to state media. The depreciation has sent panic through the Iraqi population, which fears a price surge on imported goods such as gas and wheat. "The fundamental reason" for this depreciation is "external constraints", said Muzhar Saleh, a financial adviser to Prime Minister Mohammed Shia al-Sudani. Since mid-November, Iraqi banks have had to comply with certain criteria of the SWIFT international transfer system in order to access their foreign reserves, estimated at $100 billion and held at the US Federal Reserve. "Taking part in the international cross-border fund transfers requires complying with global anti-money laundering provisions, counter terrorist financing provisions, and sanctions provisions -- such as those that apply to Iran or Russia," Iraqi economic expert Ahmed Tabaqchali said. "The new regulations require high levels of disclosure and transparency," he said, adding that this came as a "shock for many... of our banks, who were not used to this". The Iraqi central bank has described the currency fluctuation as a "temporary situation" and the authorities have taken measures seeking to stabilise the exchange rate. These have included facilitating dollar trade in the private sector through Iraqi banks and opening foreign exchange outlets at state-owned banks for those wishing to travel abroad. The cabinet has also decided to "oblige all state bodies to sell goods and services in Iraq in dinars at the central bank's exchange rate" of 1,470 to the dollar. Inflation was at a relatively low 5.3 percent year-on-year in October 2022 when it was last registered. But fears remain over the declining purchasing power among Iraqis. Saad al-Tai, a retiree who helps his son run a small shop in Baghdad's Karrada district, is feeling the heat of the fluctuating exchange rate, describing it as "a real problem" for both traders and customers. "When the dollar was valued at 1,470, my pension was worth $336. Today, the exchange rate is 1,570 dinars and my pension is worth $314," he said.

from Asharq AL-awsat https://english.aawsat.com/home/article/4098811/iraq%E2%80%99s-local-currency-sees-two-month-roller-coaster-ride