By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Over the last few days, the government in Baghdad has been preoccupied with attempting to control the exchange rate of the Iraqi dinar against the US dollar. The rate has been dropping since April, reaching its lowest at the beginning of this week.

During the preceding week on the local market, the dinar dropped against the dollar from 1,200 to 1,300, widening the gap against the official exchange rate by 121 dinars.

The Central Bank of Iraq (CBI) sells one dollar for every 1,179 dinars to authorized banks, which then sell it for 1,189 dinars to citizens traveling for medical treatment. Otherwise, traders and others looking to buy dollars must enter a public auction for hard currency sales managed by the CBI. This is one of a series of measures overseen by the Interior Ministry.

The CBI, the country’s monetary policy authority, recently held a series of meetings with members of the country’s Parliamentary Presidential Board — which consists of Speaker Osama al-Nujaifi, First Deputy Speaker Qusai al-Suhail and Second Deputy Speaker Aref Tayfur — to explain how to deal with the decline in the local exchange rate.

In a statement issued on May 12 and obtained by Al-Monitor, the Iraqi legislature announced that the parliamentary presidential board had met that day with Abdul Basit Turki, governor of the CBI by proxy and head of the Supreme Audit Board. It also proclaimed:

“The Parliamentary Presidential Board expressed its full support for the CBI scrutinizing the private banks’ activity, archiving information and taking reform measures, which include controlling the exchange rate of the dollar, reducing money laundering and strengthening the CBI’s capacity in economic development.”

By John Lee.

The First Deputy Chairman of the parliament has reportedly demanded that the Central Bank of Iraq address the fluctuating exchange rate of the Iraqi dinar against the US dollar, and disclose the reasons.

Shafaaq News says that Qusay al-Suhai chaired a meeting of the Finance Committee, in the presence of central bank governor Abdul Basit Turki, in which he stressed the need to identify procedures taken by the management of the central bank to deal with the fluctuation of the exchange rate.

He said it was important to know the real reasons that led to this instability, “which will negatively affect the lives of the Iraqi individual”.

On Sunday, the Presidency of the parliament announced its full support for the actions that the central bank intends to take to ensure the stability of the Iraqi currency, following what it describes as its decline to the lowest level in two years.

The value of the Iraqi dinar has declined gradually over the past weeks to reach the per dollar price to about 1129 dinars after it was stable at 1120, which is the highest rate the exchange rate reaches during the past two years.

(Source: Shafaaq)

By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

According to experts, the hard-currency auction governed by the Central Bank of Iraq (CBI) — the authority in charge of implementing monetary policy in the country — has ushered in the formation of financial groups, in which board members of Iraqi private banks are investing.

Every day since 2004, the CBI has held an auction through which hard currency is sold to banks, companies and traders in exchange for evidence of import and transaction receipts. The auctions aim to prevent market speculation and stabilize the exchange rate of Iraqi dinars to the US dollar. The CBI — which does not deal with individuals — sells $1 for 1,118 Iraqi dinars.

The exchange rate has been fluctuating following an arrest warrant issued against the former governor of the CBI, Sinan al-Shabibi, at the end of last year. During his term, Shabibi tightened the auctions as information leaked about smuggling money from Iraq to Iran to meet the latter’s needs for hard currency amid international sanctions.

As a way of dealing with the accusations, the CBI prohibited any bank or company with capital of less than $400,000 from taking part in the currency auction. Additionally, all participants had to submit their participations to the criminal division in the Ministry of Interior, the economic crime unit and the money-laundering division of the CBI for approval.

By Marc Snaid.

The Central Bank of Iraq (CBI) has announced that the introduction of the new Iraqi currency has been further delayed due to teething problems with the cutting-edge technology that it will employ.

Radical new functionality including fingerprint recognition and near-field communication (NFC) promises to create a world-leading new monetary system, which will be the envy of governments around the world.

Several years of collaboration between the CBI, the World Bank, and Goldman Sachs, has made it possible to create a database to track the location and ownership of each dinar note, making the monitoring of transactions much easier.

Professor John Frink, of Springfield Heights Institute of Technology, who worked on the program, explained:

“Each note already has its own serial number, so it is a simple matter to set up a database to record the location and movement of each note.

“Near-field communication, which is already used in contact-less credit and debit cards, allows the notes to communicate with your mobile phone [cellphone] and relay information to our computers.

“Touch-sensitive paper can even record the user’s fingerprint, for additional peace of mind.“

By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

There were conflicting accounts of the reasons for the rise in the value of the US dollar against the Iraqi dinar earlier this month. Politicians and economists have said that Iranian companies boosted the value of the dollar against the dinar by entering the Central Bank of Iraq’s (CBI) auction for hard-currency sales and buying large quantities in order to smuggle them into Iran. On the other hand, a former senior official at the CBI said the rise is linked to increased government revenue from oil sales, leading to an increase in government spending.

The weekly bulletin released by the CBI says 1,260 Iraqi dinars are now trading to the dollar, a level not been reached since last year.

A member of the Iraqi parliamentary finance committee said the value of the dollar increased against the dinar because some Iraqi banks have stopped converting dinars to dollars and have sold dollars to exchange companies at prices favorable to the banks.

Hussein al-Yasiri said some banks have stopped selling dollars to regular customers and instead have been selling them to exchange companies. This has prompted Iraqis to buy dollars from the exchange companies at prices favorable to the companies. The exchanges are not subject to government monitoring.

Ahmed al-Alwani, head of the Iraqi parliament’s economic committee, said Iran’s need for hard currency as a result of international sanctions has prompted Iran to mobilize Iraqi partners to help the country get dollars through the CBI auction.

By Omar al-Shaher, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Privately held Iraqi banks have almost entirely relinquished their traditional functions — such as giving out loans, lending credit and issuing letters of credit — due to default risks. Instead, they are resorting to profit making through participation in the currency auction regularly held by the Iraqi Central Bank.

Iraqi banks demand exaggerated guarantees for the granting of any loans to local investors, for fear of defaults on payments. According to banking experts, the value of some loans does not cover more than 40% of the guarantees the privately held banks are demanding, leading to a decrease in the number of loan operations conducted by these banks to a bare minimum.

A lack of local confidence in privately held banks has contributed to their reluctance to enter the market. According to banking expert Dr. Ahmad Brayhi, “Members of the public are depositing their money in government owned banks because they feel that they will honor their commitments towards them.” He also added, “The public does not have much confidence in local banks, which is why it does not trust them with its money.”

Bank brokers affirm that most privately held banks have either closed — or chosen not to open — branches in Iraqi provinces and restrict their activities to their main branches in Baghdad, due to a reluctance to engage in real banking transactions.

Out of a total of 23 privately held banks operating in Iraq, only two are located in the city of Erbil and one in Mosul, whereas 20 are located in Baghdad.

By John Lee.

Iraq made its first major move in years to boost its gold reserves, joining central banks from emerging market economies such as Brazil and Russia in diversifying its foreign reserves.

According to a report from the Lebanese Daily Star, central bank purchases have been one of the biggest drivers of gold’s rally since 2010 – a year which saw central banks turning net buyers of the precious metal for the first time in two decades amid growing doubts about the stability of the dollar as the world’s top reserve currency.

Over the course of three months between August and October this year, Iraq’s gold holdings quadrupled to 31.07 tonnes, the International Monetary Fund‘s monthly statistics report showed on Thursday.

(Source: Lebanese Daily Star)

By John Lee.

A member of the Parliamentary Finance Committee has ruled out dropping the three zeros from the Iraqi currency in 2013 because “the ground is not prepared yet”.

MP Majida al-Timimi told AIN:

“The process of deleting zeros from the Iraqi currency in 2013 depends on the nature of the policy of the Central Bank of Iraq’s new governor.

“[The] committee did not received a letter from the CBI about this proposal or postponing it.“

The MP cited fears of counterfeit dinars, resulting in inflation, as one of the reasons for the delay.

(Source: AIN)