Prices won’t fall easily even with a cheaper dollar, economist says

BAGHDAD — Prices that have climbed since the dinar’s devaluation will not fall easily even if the dollar weakens, economist Ziad al-Hashimi said, disputing Deputy Prime Minister Mohammed Ali Tamim’s forecast of a cheaper dollar driven by U.S. cash shipments.

Tamim, who heads the Ministerial Council for Economy, said Sunday that the dollar would fall to very close to the official rate on Iraq’s parallel market, crediting $3 billion in cash he said Washington had decided to send in two months. The first shipment arrived Thursday and another was due Monday, each carrying more than $500 million, Tamim said.

“The reason is that this government’s relationship with the United States is an exceptional one, and the foundation of that relationship is trust,” Tamim said.

In a Facebook post, Hashimi wrote that Tamim had failed to explain how the government would stop the rise in the prices of goods and services, which flared when the devaluation was announced and have kept rising since. “These prices will not fall easily even if the exchange rate declines, and this matters more to the public than exchange rates themselves,” he wrote.

By saying the extra U.S. cash would help put more dollars into the markets, Tamim was repeating the mistake Prime Minister Ali al-Zaidi had made earlier, Hashimi wrote.

On Wednesday, Hashimi warned that the government’s public enthusiasm over the shipments could push Washington to cut them off again and renew pressure on the Central Bank’s reserves. The dollars belong to the Central Bank and are meant only for travelers, not for the government or the markets, he wrote then.

“Through this rhetoric, the government once again repeats its narrative, focusing on some problems while ignoring others and offering no appropriate solutions or remedies,” Hashimi wrote in his latest post.

The same happens with every statement or media appearance by an official, misleading the public further instead of building credibility and trust, he wrote.

The dollar sold for 168,250 dinars per $100 in Baghdad on Monday morning, down from 168,500 on Sunday and about 10.7% above the official rate of 152,000, according to 964media’s daily rate check.

The Ministerial Council for Economy, chaired by Tamim, discussed keeping the exchange rate stable at a meeting on Monday, and Central Bank Governor Nizar Nasser Hussein raised the travelers’ dollar allowance to $3,000 a trip, the council said in a statement. The bank’s media director had said Sunday that travelers could still buy only $2,000 and that a document circulating in the bank’s name announcing a rise to $3,500 was forged.

Since Oct. 7, the Central Bank buys dollars from the Finance Ministry at 1,500 dinars, sells to banks at 1,510 and sets the public rate at 1,520, up from 1,300, 1,310 and 1,320.

Zaidi told the parliament speaker and committee chairs on Oct. 8 that devaluation was necessary to keep paying salaries without more borrowing, after the government had weighed compulsory savings deducted from salaries, paying public employees every 45 days and taking on more debt.