Iraqi dinar plunges to a new low

Iraqi dinar plunges to a new low

2023-01-30 06:54

Shafaq News/ The value of the Iraqi currency tumbled to a record low on Thursday as the oil-rich country struggles with a foreign currency crisis.

Shafaq News Agency correspondent said that al-Kifah and al-Harithiya Central Exchanges traded the US dollar (USD) at a rate of 166,600 Iraqi dinars (IQD) to 100. This is 600 IQD above the opening rate this morning.

Traders in the parallel market of the Iraqi capital city, Baghdad, are selling the USD at a rate of 167,500 IQD to 100. The buying price is set at 165,500 IQD to 100 USD.

In Erbil, the capital city of the Kurdistan region of Iraq, the selling and buying rates also rose to 166,850 and 166,825 IQD to 100 USD.

Though the depreciation does not seem particularly dramatic, especially compared to other countries in the region, it 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.

But other Iraqi officials have placed the blame squarely on the shoulders of one actor -- the United States.

The Iraqi central bank (CBI) has described the currency fluctuation as a "temporary situation" and the authorities have taken measures seeking to stabilize 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.

Yesterday, however, CBI decided to halt direct cash sales in its daily forex auctions; a move that is expected to send the US dollar exchange rate against the Iraqi dinar to record levels.

According to a source inside the CBI, the central bank halted direct cash sales to commercial banks. Cash transactions became exclusively mediated via an online platform.

"The demand for the US dollars in the market will rise accordingly, pushing its exchange rate again the local currency to more than 1,750 dinars to 1," the source elaborated.

Recently, the dinar went into a tailspin against the dollar after the New York Federal Reserve imposed tighter controls on international dollar transactions by Iraqi commercial banks in November to halt the illegal siphoning of dollars to neighboring Iran and Syria, which are under tough U.S. sanctions.

Under the curbs that took effect this month, Iraqi banks must use an online platform to reveal their transaction details. But most private banks have not registered on the platform and resorted to informal black markets in Baghdad to buy dollars.

This has created dollar shortages as demand has outstripped supply and accelerated the dinar's descent against the greenback.

Prime Minister Mohammed al-Sudani replaced the central bank governor last week as he had not taken effective steps to tackle the consequences of the new Fed regulations and their impact on the dinar, government sources told Reuters.

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