CBI governor claims Iraq witnessing ‘lowest inflation rates’ in its history

BAGHDAD — Central Bank of Iraq Governor Ali Al-Alaq said on Sunday that Iraq is witnessing “the lowest inflation rates in the entire history of Iraq,” crediting monetary policies, daily monitoring of challenges, and sound management of reserves.

Speaking at the Iraq Investment Conference in Baghdad, Al-Alaq said, “The monetary and financial stability that has been achieved is due to a set of factors and policies adopted by the Central Bank… in addition to the sound management of reserves and the management of the banking sector in a way that contributes to achieving this stability.”

He added that foreign reserves were strong enough to “defend the exchange rate on a daily basis,” noting there was no problem with supply but that “we face an issue related to the type of demand and meeting the necessary conditions for that demand to be legitimate.”

Excerpts from Ali Al-Alaq’s speech:

The monetary and financial stability that has been achieved is due to a set of factors and policies adopted by the Central Bank in tracking developments and challenges on a daily basis, in addition to the sound management of reserves and the management of the banking sector in a way that contributes to achieving this stability.

We controlled inflation rates, and this is a fundamental basis for the stability of the private sector and investors’ work. Today, we are witnessing the lowest inflation rates in the entire history of Iraq. This indicates control over monetary circulation, the presence of comfortable foreign reserves that can defend the exchange rate on a daily basis, and a significant balance between supply and demand.

We have no problem with supply given the reserves we hold, which allow us to respond to any demand, but we face an issue related to the type of demand and meeting the necessary conditions for that demand to be legitimate.

For the first time in Iraq’s history, foreign transfers have been carried out through electronic platforms subject to auditing by international parties. We now have more than one auditing company carrying out this process.

At the beginning, we faced difficulties because this system was new, and transfers were risky. Initially, up to 80% of transfer transactions were rejected, but over time we overcame the challenges and users adapted to this new system.

One challenge was that the new system required many conditions and documents. As a result, many users tried to avoid these channels, instead obtaining dollars from the black market as cash purchases and then transferring them. This was another challenge.

But over time, after we organized the process of cash dollar sales and prohibited their use for unauthorized purposes, the supply of cash dollars in the market decreased. This made it costly for traders to turn to the black market due to the high price difference, forcing them to gradually return to the official channels. The number of users of the new transfer channels has since expanded, reaching thousands daily.

We sought to open multiple channels for foreign transfers so that they would not be limited and affect the exchange rate. We created multiple channels both in terms of currencies—moving to direct transfers in other currencies- and by expanding the number of correspondent banks abroad.