Baghdad Struggles to Halt Devaluation of Iraqi Dinar

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.

4 Responses to Baghdad Struggles to Halt Devaluation of Iraqi Dinar

  1. Mahdi 21st May 2013 at 20:16 #

    This is what happens when incompetents take over the control of the CBI. Apparently it was not enough for to take over illegally the CBI, they had to add currency instability to the mix. The main persons listed in this article that planned an institutional Hold Up on the CBI are:

    Abdul Basit Turki
    Qusai al-Suhail
    Osama al-Nujaifi
    Haider al-Abadi

    Incredible that they all agreed with Al-Maliki in october 2012 to remove the old administration of the CBI.

    The major error that Abdul Basit Turki made was not to meet the demand for USD in the daily auctions since he illegally took over. Now that the country is in political turmoil and the demand for USD is at its peak for years, he finds himself in a situation where he has to open the valves in a panic mode. This is too little too late!

  2. Sus 22nd May 2013 at 00:10 #

    It's simple. USD demand high cause everything is priced in dollars. Everything imported. Nothing being produced or exported so no dollars coming in. Foreign projects in dollars and profits mostly repatriated back out.
    Simply no demand for dinars.
    So what do you do?
    You encourage pricings of certain sectors to only be carried out in dinars.
    You remove dollarisation pressure a bit.
    Israel were great at this.

  3. Nasab 22nd May 2013 at 12:14 #

    Iraq is a major oil exporting country and it exports most if it (nearly 2.5 million barrels per day), which in turn creates an important inflow of foreign currency in the county

    It should have enough foreign exchange reserves to meet foreign currrency demands from the private/public sector and keep the Dinar stable. The CBI's $70 billion in foreign exchange reserves is not small by any standards. Why the current CBI administration has put itself/and the domestic currency market in such a mess is a mistery to most observers.

  4. Hussan 28th May 2013 at 10:46 #

    I have a little knowledge in economy. But I can see that the value of £1=$1.509 this morning. This means that the British people find too expensive to go for holiday in USA. Also I found that Iraqi Dinar is doing alright. If I sell my Iraqi Dinar this morning of course if there is a buyer I would get more pounds. I do understand what all this fuss about.