Shafaq News / The Kurdistan Regional Government (KRG) announced, on Friday, that more than 25,000 government employees have received their salaries through the “My Account” project.
According to KRG’s Media and Information Department, employees with bank cards enabling them to receive their salaries via ATMs will receive their payments gradually by the end of next week.
Earlier, Kurdish Prime Minister Masrour Barzani had confirmed that one million employees would have access to banking services by the end of this year, with financial services accessibility in the Region expected to reach 35% by late 2024.
KRG shed light on the My Account payroll system’s advantages, assuring that civil employees have more control over their balances with lesser fees compared to other options.
In a statement, KRG’s Information and Media Department highlighted key features differentiating “My Account” (Hesabi) from the “Domiciliation” project.
“My Account”, according to the statement, empowers employees to select their preferred bank, unlike domiciliation where a bank is assigned based on pre-existing agreements.
The new system includes six private banks, according to the statement. The other system involves five state-owned and 38 private banks.
“My Account” also offers free ATM withdrawals at the chosen bank. Conversely, employees who have their salaries domiciled should pay extra charges upon withdrawals through agents or ATMs.
“Enrolling in the My Account system is free, unlike Domiciliation, which may charge up to 25,000 IQD depending on the bank,” the statement continued.
“My Account utilizes debit cards that can be used all over the globe, whereas the Domiciliation system typically employs, salary cards’ not linked to other accounts.”
Up until April, over 300,000 civil servants have already registered for My Account. KRG said it is actively expanding its ATM network to ensure convenient access for registered employees. The current count of 231 ATMs is expected to quadruple by the end of 2024.
Shafaq News / The stability of the Iraqi dinar has been facing great challenges for years, as it is witnessing price fluctuations that have not stabilized, especially with the rapid rise of the dollar price and its very slow decline, as well as a gap between what the Central Bank of Iraq determines with what is sold in the parallel market, especially in banking shops that do not adhere to the instructions of the Central Bank.
To avoid the syndrome of “volatility” and “gap” in the price of the Iraqi dinar against foreign currencies, some experts believe that the solution lies in a kind of “surgical” operations of the country’s monetary system that may be painful, but achieve long-term monetary stability for the national currency through “float.”
The cash sale price according to the Central Bank is 1305 dinars per dollar, while the price for remittances abroad is 1310 dinars against the dollar, and the price in the parallel market is about 1450 dinars against the dollar in mid-May, according to local media, while it reached levels of 1600 dinars against the dollar in previous periods.
For months, the Iraqi authorities have imposed restrictions in their effort to control exchange rates, limit all commercial transactions within the country to the Iraqi dinars, and put in place a new mechanism that subject to external remittances for further scrutiny.
Iraqi economic analysts who spoke to Al-Hurra website warned some of them against making a decision that leads to the float of the dinar, while some believe that a mediate policy can be taken that suits the Iraqi economy based on “float” and “stabilization” at the same time.
Does the flotation policy fit the Iraqi economy?
The Prime Minister’s adviser on finance, Mazhar Saleh, believes that the flotation of the currency price does not suit the Iraqi economy, especially as it is “a rential economy, dominated by reserves in foreign currency.”
He explains in statements to the “Al-Hurra” website that “the economic vision that wants to float the Iraqi dinar to end the gap between the official price and the parallel price may be possible in an economy where the free market alone is affected in the movement of the balance of payments, and not in an economy in which the government sector is the dominant rent, and the generator of foreign currency reserves.”
“The monetary authority in Iraq alone is the main source of foreign currency supply and the meeting of the desired demand for foreign exchange in the domestic market,” he added.
Saleh believes that the claims for flotation means a provision “the adoption of the prevailing exchange rate in the parallel market, to achieve the goal of stability and balance in the official exchange rate itself at a new point of exchange reached by the market at the end of the assumed flotation policy and return to stability again.”
The flotation scenario also means “the withdrawal of monetary power as the main central exhibitor of the foreign currency, and is replaced by new forces of free market makers, which certainly have only a limited offer of foreign exchange,” according to Saleh.
He points out that these forces carry an “uncontrolled package of inflationary expectations, called in the economic literature (the forces generating inflationary expectations), which will give the dominance of supply forces from speculators” who possess limited amounts of foreign exchange, offset by “open demand for foreign currency by the market,” exceeding “more than ten times in our estimate.”
Counselor Saleh described this policy as “blitted,” as long as “the central government supply of foreign currency will be absent from the market, we will not get any equilibrium point in an exchange rate that the flot is looking for except with a wide deterioration of the exchange as long as it is taking over by forces generating inflationary expectations in a very monortial economy.”
He warns that the exchange rate move in an “incomplete market, in terms of productivity in its compensation for the required commodity and service supply,” no one “will know how much the new exchange rate caused by the flotation” will be, which will be accompanied by “a wave of inflationary expectations,” which is difficult to control its trends, which may prompt monetary policy makers to “intervene with superior foreign reserves and unjustified waste in foreign exchange to impose stability.”
According to the World Bank, Iraq has 145 billion barrels of proven oil reserves, and is among the largest crude oil reserves in the world.
But Iraq hopes the country’s oil reserves will exceed 160 billion barrels, Oil Minister Hayyan Abdul Ghani recently announced.
What if the Iraqi dinar is floated?
The claims that appear every period for years and call for the float of the Iraqi dinar exchange rate are “strange” and most of them are released from people “not specialized in economics or monetary policy,” according to the professor of international economic relations, Abdul Rahman Al-Mashhadani, for Al-Hurra.
“Iraq cannot continue to float the dinar exchange rate, as evidenced by all agreements concluded with the International Monetary Fund since 2004, and the reviews were commending the fixation of the exchange rate by the Central Bank of Iraq,” he asserts in a decisive tone.
Al-Mashhani added that there has been a study from experts at the World Bank over the past years that has recommended “an exchange rate hike,” noting that even so, “these recommendations cannot be taken because the World Bank is concerned with regard to economic development, but following up on the recommendations for monetary policies is taken if they are from the International Monetary Fund.”
In its recent review Thursday, the International Monetary Fund praised the efforts of the Central Bank of Iraq in tightening monetary policy and strengthening its liquidity management framework.
He explains that “the real gap in the production wheel in the Iraqi economy, the majority of goods are imported from abroad, which means that the flotation will cause a spiral in price rates to become significantly high and affect marginalized classes,” noting that such a decision cannot be taken from the “monetary policy section” only, as the burdens it will impose on citizens must be considered.”
Al-Mashadani stresses that what has been applied in other Arab countries does not “mean that it can be applied to the Iraqi economy,” as the exchange rate is likely to become “at levels of 5000 dinars against the dollar,” as “the central bank has lost control of exchange rates, leaving them to float.”
He feared that the “float” would reflect on “social” problems as “salaries would be significantly eroded,” which could threaten to “slide new layers into poverty,” while “a class of traders, politicians and businessmen, who would benefit from the instability that would result from this would benefit.”
Al-Mashhadani agrees that the final flotation means “that the parallel market controls exchange rates,” but it will not achieve “the desired monetary stability,” as the central bank will then need to “print more local currency to keep up with market demand,” and the government will need to increase salaries and allocations for social assistance packages.
The Iraqi government’s adviser, Saleh, attributes the cause and quality of the “gap” in the exchange rates of the dinar against the dollar between the official market and the parallel to “external factors imposed by the compliance platform and administrative auditing restrictions on external transfer movements, which is not related to the deficit of the Monetary Authority’s reserves,” noting that Iraq’s foreign currency reserves are the highest in the country’s history, as it touches the levels of imports coverage for 16 months, compared to the global scale, which does not exceed the coverage of imports three months.
Dollar remittances through official channels have increased significantly in Iraq, as Iraq continues its reforms to the financial sector in line with international standards, according to a previous AFP report.
In late 2022, the Iraqi banking sector adopted the SWIFT electronic transfer system with the aim of providing better control over the use of the dollar, ensuring compliance with US sanctions on Tehran, as well as in order to limit the prosperity of the informal economy.
The financial standards adopted encouraged the emergence of a parallel currency market to attract those looking to obtain the dollar out of official channels.
Saleh pointed to the distortion in the price support of some commodities “from the side of fiscal policy, a support in which the rich and the poor are often both indiscriminate, and represents a real added intaly imperceptible income, which is the product of a financial policy inherited from the consumer welfare state of the rentier supplier.”
He added that “it is not yet possible that 90 percent of Iraq’s population is receiving support for the foodstuffs provided by the state as an extension of the 90th economic blockade in light of the changing living standards and lifestyle, the high numbers of the mysort and the growing middle class.”
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