Iraq Tries Again to Buoy Dinar, Stem Dollar Flight

Reuters reports that Iraq’s central bank, struggling to stem an illicit tide of dollars into sanctions-bound Iran and Syria, has had some success in steadying its own dinar by pumping dollars to Iraqis through two state-run banks.

Late last month the central bank allowed U.S. dollars to be sold at a fixed rate through two state-run banks, Rafidain and Rasheed, helping to push the dollar from 1,280 dinars to 1,210 dinars and closing the gap between the official rate and the market price.

The central bank has started channeling $6 million a day through the two banks, Mudher Kasim, deputy governor of the Central Bank of Iraq (CBI), told Reuters. "The difference in the value of the Iraqi dinar between the central bank price and the market was seven percent but now it is less than four percent ... We are expecting it to drop below two percent in a few weeks", he said.

The central bank usually sells about $250,000 to private banks and $75,000 to currency exchange and money transfer shops on a weekly basis.

For months, traders have been snapping up dollars at the central bank’s daily auctions for sale in neighboring Syria and Iran, buying up to $400 million on some days in December from a previous average of $150 million, according to central bank data.

Kasim said the CBI had since extended the clearance period to six months to allow for more flexibility in the importing process. Four private banks have also asked the CBI for permission to sell dollars at a fixed rate.

The CBI has said Iraq’s large foreign reserves, which have risen to a record $60 billion on the back of high oil prices, will shield its financial system from damage.

However, some economic analysts say the measures may not sustain dinar stability in the long run.

"We are still importing more than 85 percent of our needs and there is still pressure from Syria and Iran," said economic expert Majid al-Souri.

(Source: Reuters)

8 Responses to Iraq Tries Again to Buoy Dinar, Stem Dollar Flight

  1. Sammy 8th June 2012 at 03:29 #

    yeah, why not, Iraq neighbours will have to have a bite from the cheap Iraqi meat, they killed us when we had the embargo by sucking all the resources and now they are sucking more out of our rooting body, well there is no end to it, Iraq will always be seen as the soft target. Hasbi Allah

  2. max 9th June 2012 at 17:26 #

    Iraq flooded the market with their currency, the Dinar, now they have too much in circulation and need to real it in, now if an Iraqi wants to buy something that costs $1000 US Dollars they need a wheelbarrow of Dinar. Once they real in the dinar and reduce the amount the have in circulation they will be in a position to revalue their own currency and the Dinar will be as valuable as a Dollar, that will allow Iraq to openly trade with other countries that have US Sanctions against them without opening themselves up to possible sanctions due to violating sanctions put on other countries.

    It looks like they are trying to real in the Dinar....

  3. Stew 9th June 2012 at 19:40 #

    So you are claiming that Iraq could be violating sanctions by trading with a country with the current 1000:1 rate, but if they change the rate to 1:1 then they would not violate any sanctions.
    Can you provide a link that backs that up in any way?
    That might be one of the more nonsensical things I’ve ever read about the dinar. I’d love to know which dinar guru feed you this line.

  4. DOC 10th June 2012 at 09:51 #

    [Offensive comment removed by Editor]

  5. DOC 10th June 2012 at 09:54 #

    Apparently he either can't read or comprehend one or the OTHER.The article was very plan to see,how they are putting value to the DINAR compared to the dollar.LOL SMH

  6. DOC 10th June 2012 at 09:57 #

    60 billion in foreign reserve,Mmm

  7. max 10th June 2012 at 21:27 #

    if the dinar was worth anything they wouldn't need to have U.S. dollars in circulation that would get out of the country. there wouldn't be us dollars floating around, they could control it. leaving the value of the dinar at 1165 only makes the Iraqi people use dollars which in turn makes dollars available to other countries through trade and illegal markets.intentionally keeping the dinar at 1165
    +/- only makes a market for US Dollars and bleeds their reserve. if they buy anything substantial from another country at their current position they either use US dollars or pay with a ship load of worthless dinar.

  8. Jaydee 11th June 2012 at 20:47 #

    The Iraqi government is so....... How can't they see that revaluing their currency at least at .20 to .50 on the U.S.dollar would solve their economic problems. Like Max mentioned they are flooding the market with their money which is killing the value. I know only the CBI benefits on the selling of the Iraqi dinar during their "auctions".

    I'm disappointed with the CBI/Iraqi government. They don't really care about their people.