Analysts provide a different outlook
Iraq’s central bank optimistic on dinar’s future despite continued fluctuations
BAGHDAD — The U.S. dollar continues to experience fluctuations against the Iraqi dinar, with traders reporting the greenback hit below 1,450 dinars on Saturday.
Ammar Hamad Khalaf, deputy chief of the Central Bank of Iraq, attributed the decline to more private sector companies financing their investments through the CBI as well as the bank’s improved ability to fulfill dollar demand linked to foreign trade. Those capabilities are further bolstered by reserves exceeding $100 billion.
Black market exchange rates hovered around 1,462.5 dinars per dollar in Baghdad, on Saturday, while the official CBI rate stood at 1,320 dinars.
“The central bank’s rates are relatively stable, with daily published figures showing minor fluctuations,” Khalaf told 964media.
He noted a significant change in the country’s economic landscape, pointing out an increase in business activities from private sector companies. “These companies have recognized the importance of investment and have effectively structured their activities through the [CBI’s] platform, official channels, and accredited banks in Iraq,” he explained.
Furthermore, Khalaf underscored “the high level of coordination and ongoing communication” between the CBI and Iraq’s federal government, pointing to a “synergistic approach” to managing the nation’s financial stability and economic policies.
According to Khalaf, the bank’s primary goal is to bridge the gap between the black market and official exchange rates in order to reach a stable and permanent decrease to 1,320 dinars per dollar.
Economic analyst Nabil Jabbar Al-Tamimi shared insights into the country’s financial cycle and market speculation.
“Monitoring and analyzing Iraq’s financial cycle reveals a 30% increase in the central bank’s sales, sometimes reaching up to $300 million,” Al-Tamimi said. “This expansion has included significantly more traders, steering them away from the parallel market.”
A jump in dollar sales in April was driven primarily by a shift in the remittance pathways, he added. Previously confined to a platform managed by both the CBI and federal banks that often delayed merchant transfers for weeks, an additional channel has been opened through private banks.
“These banks have managed to establish direct accounts with corresponding foreign banks, alongside the existing platform transfers, effectively doubling the avenues for remittances and boosting sales figures,” he added.
Al-Tamimi highlighted several factors influencing the informal exchange rate, including geopolitical realities related to dealings with the U.S. Federal Reserve and the Treasury Department. He further cited internal factors linked to sales mechanisms, sales volume, and traders’ access to the dollar as well as the role of speculators.
Diaa Al-Taie, a representive of a collective of Iraqi currency exchange businesses, offered a more pessimistic view. Referencing recent media coverage of a resolution to sanctions on Al-Huda Bank, he noted that despite promises from the U.S. Treasury to PM Mohammed Shiaa’ Al-Sudani, no immediate solution is expected.
“Washington has not made any decisions that directly affect the exchange rate,” Al-Taie said. “There has been no increase in dollar allocations, nor has any bank been restored to operation or had sanctions lifted. Therefore, this [rate] decrease is merely manipulation and does not reflect a change in the structure of Iraq’s economy.”
He further cautioned that the exchange rate is likely to rise again, arguing that recent stability is not based on real or permanent changes in the CBI’s policies towards the U.S. dollar.
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