Al-Harith Hassan, an employee of the oil sector, withdraws money on December 8, 2023 in Basra, the large city in southern Iraq (AFP/Archives/Hussein Faleh)
An oil sector employee in Basra, Al-Harith Hassan has not been able to freely withdraw his salary in dollars from the bank for several months. In Iraq, where the authorities are fighting against the black currency market, restrictions are placed on the use of the greenback.
A paradox for the country rich in hydrocarbons, with colossal foreign currency reserves exceeding 100 billion dollars. But the emergence of a parallel foreign exchange market and the authorities’ fight to strengthen banking supervision – in line with Washington’s international regulations – have destabilized daily life.
Officially, the exchange rate is around 1,320 dinars per dollar. In exchange offices, the local currency exchanges at more than 1,500, even 1,600 dinars for the dollar.
A man walks past a branch of the central bank of Iraq on December 8, 2023 in Basra, the large city in the south of the country (AFP/Archives/Hussein Faleh)
“For three months or more, it has been very difficult to withdraw dollars from the bank,” summarizes Mr. Hassan, 37 years old.
Employed in logistics on an oil field in the south of the country, he earns around $2,500 per month. “When we withdraw our salary, they only give us a fraction of it, in installments.”
Lately, he said, the trend is leaning more and more towards the payment of salaries in dinars according to the official rate.
“It’s a problem. It means that the salary loses 20% of its value due to the difference between the official and unofficial exchange rates,” he laments.
An employee in a currency exchange office on December 8, 2023 in Basra, the large city in southern Iraq (AFP/Archives/Hussein Faleh)
From January, the Central Bank will impose the dinar – rather than the dollar – for all commercial transactions and other operations within the country.
– “Monetary sovereignty” –
If existing dollar deposits can be withdrawn normally, promises the Central Bank, from 2024, any transfers from abroad will be cashed in dinars, at the official exchange rate.
The question is controversial, but “this will be the basic rule, within the framework of monetary sovereignty, even if there will be exemptions”, notably embassies, the Prime Minister’s financial policy advisor told AFP, Mudher Salih.
“We are consolidating monetary sovereignty. We cannot accept operations with two currencies within the national economy,” argues Mr. Salih.
Likewise, the Hawala, a system of over-the-counter money transfer, without a bank trace, no longer transfers sums in dollars, being limited — officially — to transfers in dinars according to the official rate.
Baghdad and its banking sector have adopted the SWIFT electronic platform. Objective: to monitor the use of dollars and bring a thriving informal economy into line, with importers and traders sometimes tempted by tax evasion.
An employee counts bundles of Iraqi dinars on December 8, 2023 in Basra, the large city in southern Iraq (AFP/Archives/Hussein Faleh)
The Iraqi Prime Minister, Mohamed Chia al-Soudani, admitted that with the new measures, the quantities of foreign currency supplied to the market had fallen from “200 or 300 million dollars” per day to “30, 40, 50 million dollars “.
One of the “main factors” fueling the demand for currencies in the parallel market remains “the smuggling of dollars to countries and entities subject to sanctions, notably Iran and Syria”, recalls Hayder Al-Shakeri, researcher at the think tank Chatham House.
In September, Mr. Soudani indicated that traders who deal with Iran were forced to turn to the parallel market for their currencies, with sanctions preventing bank transfers.
However, he assured that the Iraqi and Iranian central banks were discussing a “mechanism” to “regulate trade”, a measure which should “break the back of the parallel market”.
– “Illicit trade” –
Mr. Shakeri also cites the “illicit trade” of certain “highly taxed products”, such as cigarettes.
At the end of November, the government announced facilities to encourage importers of cigarettes, cars, gold and mobile phones to obtain foreign currency through official channels.
As part of bilateral trade, the authorities also encourage banks and importers to use alternative currencies such as the euro, the Emirati dirham, or the Chinese Yuan.
Al-Harith Hassan, oil sector employee, during an interview with AFP on December 8, 2023 in Basra, the large city in southern Iraq (AFP/Archives/Hussein Faleh)
“Iraq’s financial situation is very solid,” says Mr. Salih, the government advisor, citing foreign currency reserves which have reached a historic high.
To protect 43 million Iraqis from inflation, importers can obtain dollars at the official rate, which is more advantageous, he adds. This concerns food products, medicines and construction materials.
Iraqi travelers are also allowed to withdraw dollars before their departure. Here again, a problem: the police arrested several people at the airport in possession of dozens of debit cards, used to withdraw thousands of dollars abroad – at the official rate – then resold on the black market in Iraq. .
© 2023 AFP
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