Iraq. Compliance with the Swift system affects the exchange rate of the dinar
The exchange rate of the Iraqi dinar fluctuates against the dollar, which experts attribute to the fact that Baghdad began to comply with international restrictions, including financial transfers in hard currency, and experts lay the responsibility for this on Washington.
And while the official fixed exchange rate is 1,470 dinars to the dollar, the market price of the local currency declined from mid-November to 1,600 dinars earlier in the week before settling around 1,570 dinars, according to official news. agency, which means that the Iraqi currency has lost about 10% of its value.
This decline is not considered huge, but it has begun to worry Iraqis about high prices for imported materials such as gas and wheat.
The prime minister’s financial adviser, Mazhar Saleh, told AFP that the “primary and fundamental cause” of this downturn “is the external constraint.”
Hadi al-Amiri, head of the Al-Fateh Alliance, a spokesman for the Popular Mobilization Forces, which includes Iran-loyal factions affiliated with that country, in a previous statement accused the Americans of putting “pressure on Iraq to prevent it from opening up to Europe.” and countries of the world.
On the other hand, economist Ahmed Tabakishli believes that “contrary to rumors and disinformation, there is no evidence of US pressure on Iraq,” an important economic and trade partner of neighboring Iran.
In fact, the volatility of the dinar is due to the start of compliance by Iraq with some standards of the international system of transfers “Swift”, which Iraqi banks must apply from mid-November to access Iraqi dollar reserves in the United States.
For Iraq to be able to access these $100 billion reserves, it must now comply with systems that “require compliance with international anti-money laundering regulations, terrorist financing regulations, and those associated with sanctions.” Ahmed Tabakishli.
He adds that the case is about Iraq’s entry “into a global financial transfer system that requires a high degree of transparency” but that it “shocked” many Iraqi banks “because they are not used to the system.”
Since the restrictions began to be put in place, the Federal Reserve has turned down “80% of requests” for money transfers to Iraqi banks due to doubts about the final destination of these transfers.
This refusal affected the supply of dollars in the Iraqi market. On the other hand, demand has been accumulating but supply has not matched it, and thus the exchange rate has depreciated with a decrease in dollar bank transfers.
Iraq’s central bank said Tuesday in a statement that the exchange rate would return to where it was in two weeks, calling the “dollar price shock” a “temporary situation.”
In the meantime, the Iraqi authorities have taken a number of measures, including facilitating private-sector dollar trade finance through Iraqi banks and opening foreign exchange outlets at state-owned banks to the public for travel.
The Council of Ministers also decided “to oblige all government agencies to sell all goods and services inside Iraq in dinars and at the central bank price (1470) dinars per dollar.”