Free / Special – Washington03 November 2022
The Iraqi Prime Minister, Muhammad Shia Al-Sudani, confirmed in statements on Tuesday that the decision to “change the exchange rate of the Iraqi dinar against the dollar is the prerogative of the Central Bank, and we are committed to implementing what the Central Bank deems appropriate,” which some considered a retreat from previous promises and positions of the President to reduce the exchange rate.
The new prime minister indicated that the decision to “raise the dollar exchange rate was not accompanied by measures to protect the vulnerable classes,” according to local media.
In 2020, the Central Bank of Iraq had raised the exchange rate against the dollar to 1460 dinars, after it was in the range of 1182 dinars against the dollar, in a move aimed at compensating for the decline in oil revenues at the time.
The Sudanese Prime Minister had expressed, in previous statements before taking office, his rejection of the central decision that he approved in agreement with the caretaker government, headed by Mustafa Al-Kazemi at the time, calling for the need to reconsider the decision to raise the “dollar exchange rate to prevent its negative effects.”
The head of the State of Law coalition, Nuri al-Maliki, who supports the Sudanese, proposed, on Wednesday, to reduce the exchange rate of the dollar to 1375 dinars.
The Coordination Framework bloc, led by Al-Maliki and which included pro-Iran factions, had criticized Al-Kazemi’s decision, at the time, to reject the exchange rate of the dollar in Iraqi dinars.
‘populist promises’
The economic researcher, Salam Sumaisem, described the promises made by the former prime minister and the bloc supporting him, regarding the dinar exchange rate, as “populist promises aimed at flirting with the feelings of citizens”, but on the ground they are “not applicable.”
Sumaisem explained in an interview with Al-Hurra website that the decision to “set the Iraqi dinar exchange rate is a purely monetary economic decision, and not a political decision that is controlled by the government,” noting that setting the current price came in accordance with a five-year monetary economic plan, which has passed. Two years now, and we still have “at least three years to stabilize the exchange rate at its current levels”.
The Iraqi economist, Mahmoud Dagher, believes that the change in the Sudanese position towards decreasing the exchange rate of the dinar is “healthy”, as he met with the governor of the Central Bank, who explained to him the need for stability and independence of the country’s monetary policy.
In response to Al-Hurra’s inquiries, Dagher pointed out that “the Central Bank Law of 2004 limits the powers to determine the exchange rate and monetary policy in the hands of the Central Bank,” and that is why the Sudanese should not interfere in the matter.
But Adel Al-Manea, a member of the State of Law coalition led by Al-Maliki, said in a statement to Al-Hurra that the Sudanese government “is proceeding with its decision to amend the exchange rates to serve the Iraqi dinar against the dollar.”
He stressed that “there is no retreat from this decision,” noting that the process of adjusting the exchange will be gradual, and its first features will appear “in the draft budget law” prepared by the new government.
Al-Manea expects that the new government will aim to bring the exchange rate to a rate of “1300 Iraqi dinars to the dollar” and will serve the country’s economic goals during the next “important” stage.
On Monday, the Ministry of Finance announced the start of preparing the budget law for 2023, and the financial advisor in the ministry, Abdul Hassan Jamal, told the Iraqi News Agency “conscious” that “the amendment of the dollar exchange rate is within the government’s policies, and the Council of Ministers is the one who makes the decision, but in the budget it was not presented for a purpose. right Now”.
Is there a need to reduce the exchange rate?
The researcher, Sumaisem, warned that any decision to devalue the currency may incur a loss of no less than “52 trillion Iraqi dinars” for the Iraqi economy, stressing that such decisions should not be taken “arbitrarily or emotionally.”
She indicated that the current economic indicators do not reveal any “need to adjust the exchange rate, and there are monetary and financial tools that can be used to reduce the effects of inflation and help marginalized classes.”
This expert opinion is supported by Dagher, who says that “all economic rules support the exchange rate to remain the same for several reasons, the most important of which is the stability of the currency.”
He asserts that any change in the exchange rate against the dollar will not be in the interest of the Iraqi economy, but it will serve the interest of “speculators” who want to exploit the exchange difference for their own benefit without considering the interest of the economy as a whole.
Dagher called on politicians not to “use the exchange rate decision in populist statements,” as he put it, noting that it causes unnecessary “speculative waves in the market.”
The head of the “Alwan” Center for Strategic Studies, Haidar Al-Barzanji, who is close to the coordination framework, hinted that the opposition to changing the exchange rate of the dinar was for political strife and nothing more, on the grounds that “economic realism differs from political discourse,” according to his belief.
Al-Barzanji, a media commentator who defends the viewpoint of the framework and the forces affiliated with it, continued: “There is an economic reality that cannot be changed… Specialists say that the exchange rate cannot be changed until after 4 or 5 years.”
The Association of Iraqi Private Banks said in a statement issued last week that “the return of dollar prices will negatively affect the economy,” stressing that “the slight decline in the exchange will not reduce the prices of materials in the markets.”
And the economic advisor in the association, Samir Al-Nusairi, considered, in an interview with ” Waa’a “, that “the current little decline in the exchange rates of the dollar is a kind of confusion practiced by speculators in the currency trading market, by exploiting rumors to achieve narrow interests.”
Al-Nusairi warned that “the process of changing and returning to the previous price of the dollar’s value against the Iraqi dinar, will lead to high costs borne by the economy,” in addition to “disastrous damages that will be borne by the citizen because of the problems that will occur in internal commercial and financial transactions.”
And the Central Bank of Iraq confirmed in a statement last week that “there pis no intention to change the exchange rate,” and called in a statement to the Iraqi News Agency to “preserve the value of their money and stay away from what is rumored in the media.”
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