A street money changer counts banknotes at the Al-Kifah Stock Exchange on December 27, 2022 in Baghdad, Iraq (AFP/Archives/AHMAD AL-RUBAYE)
It falls, it rises, it falls: for two months, the Iraqi dinar has not stopped fluctuating against the dollar under the effect of new rules on the transparency of transfers, an instability behind which some see the hand of Washington.
The official dollar exchange rate – the reference currency in Iraq – remains at 1,470 dinars. But among money changers, the rate rose from 1,470 dinars in mid-November to 1,600 dinars at the start of the week, before stabilizing, according to the official INA agency.
At first glance, this drop in the value of the dinar is not huge. But the nervousness is palpable. A drop in the dinar means higher prices for imports, gas or wheat, a commodity whose cultivation has fallen in Iraq due to repeated droughts.
“The decline of the dinar is due to external constraints,” explained to AFP Muzhar Saleh, an adviser to Prime Minister Mohamed Chia al-Soudani.
But for some Iraqi officials, the culprit has been found: the United States.
“The Americans are using the dollar as a weapon to starve people,” said Hadi al-Ameri, head of the pro-Iranian Fateh party which supports the Iraqi government, on Tuesday, according to comments reported by Iraqi media.
False, thwarts the Iraqi economist Ahmed Tabaqchali. “There is no evidence that the United States is putting pressure on Iraq”, a close economic and financial partner of its Iranian neighbor, he said.
-“Shock”-
In reality, the movements of the dinar are linked to certain rules of the Swift international transfer system to which Iraqi banks have complied since mid-November to access Iraqi dollars in the United States.
A street money changer counts dollar bills at the Al-Kifah Stock Exchange on December 27, 2022 in Baghdad, Iraq (AFP/Archives/AHMAD AL-RUBAYE)
To draw on its stock of greenbacks, Iraq, which has foreign currency reserves of more than $100 billion, must “respect the measures to combat money laundering, the financing of terrorism and those on sanctions , such as those against Iran and Russia”, explains Ahmed Tabaqchali.
It is a question of making Iraq adhere “to a world system of financial transfers which requires a high degree of transparency”. Many Iraqi banks “are not used to this system”. “It caused a shock,” he says.
Because Iraqi banks must now register “their transfers (in dollars, editor’s note) on an electronic platform, verify the requests. Then, the Federal Reserve examines them and if it has doubts, it blocks the transfer”, continues Muzhar Saleh.
Since the establishment of this mechanism, the American Fed has rejected “80% of requests” for transfers from Iraqi banks, because the American authorities had suspicions about the final recipients of the sums to be transferred, he indicates.
– Purchasing power at half mast –
The “no” from the Fed contributed to making the dollar rare on the Iraqi market. The law of supply and demand did the rest: the dollar rose in price, while the dinar fell.
A street changer at the al-Kifah Stock Exchange on December 27, 2022 in Baghdad, Iraq (AFP/Archives/AHMAD AL-RUBAYE)
The Central Bank of Iraq speaks of a “temporary situation” and the Iraqi authorities have taken measures to try to stabilize the exchange rate.
They pledged to facilitate the supply of dollars at the official rate for private sector imports, and government banks opened “windows” to sell foreign currency to individuals traveling abroad.
The government has also decided “to encourage all government agencies to sell goods and services in dinars and at the Central Bank price of 1,470 dinars to the dollar”.
“These measures are important because they show that the state is there to protect the market and the citizen,” argues Muzhar Saleh, the Prime Minister’s adviser.
Inflation is certainly contained – it was 5.3% over one year in October 2022 – but when the dinar weakens… it is purchasing power that wins.
“When the dollar was worth 1,470 dinars, my pension was equivalent to 336 dollars per month. Today, with the dollar at 1,570 dinars, it is equivalent to 314 dollars”, explains Saad al-Taïe, a retiree who helps his son in his grocery store from Baghdad.
© 2023 AFP
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