MOST NOTABLY, THE TRAVELERS’ DOLLAR. AL-SUDANI’S ADVISOR REVEALS THE REASONS FOR THE EXCHANGE RATE’S DECLINE.

MOST NOTABLY, THE TRAVELERS’ DOLLAR. AL-SUDANI’S ADVISOR REVEALS THE REASONS FOR THE EXCHANGE RATE’S DECLINE.

Mazhar Mohammed Saleh, the Prime Minister’s financial advisor, revealed on Thursday the reasons for the decline in the dollar exchange rate, indicating that three factors led to weak demand in the parallel market:

 the Central Bank’s success in financing foreign trade by strengthening the dollar with national bank correspondents abroad, encouraging financing small businesses without costly intermediaries, and the success of travelers in collecting their dues in foreign currency through payment cards in large amounts at a reduced cost and at an exchange rate of 1,320 dinars per dollar.

Three main factors have led to weak demand in the parallel market for the dollar, causing its price to decline towards the official exchange rate at an average rate of change in favor of the dinar by about 15% over the past few weeks or months. The first is the success of the Central Bank of Iraq in financing foreign trade for the private sector and major traders by rapidly strengthening the dollar with correspondent banks of national banks abroad with AAA ratings. This is in addition to the start of direct financing of foreign banking operations in euros, Emirati dirhams, and Chinese yuan through bank correspondents of Iraqi banks with high credit ratings, which encouraged the speed of payments and transfers in trade with the markets of the UAE, Turkey, and China, which are among the largest commercial shopping centers for Iraq. The second is encouraging the financing of small businesses without costly intermediaries, which constitutes approximately 60% of private sector trade after many of the previously imposed restrictions were lifted and dealings were conducted through the same solid correspondent banks and directly through Iraqi banks. The third and most important factor is the success of the traveler segment, which has quickly become accustomed to collecting its dues in foreign currency through payment cards in large amounts at a reduced cost and at an exchange rate of 1320. One dinar for every dollar, plus, without any hassle, the collection of cash dollars through the airports of the Republic of Iraq, in the amount of $3,000 at the official exchange rate for each traveler per month, provided they carry an electronic payment card, whether credit, debit, or prepaid, as we mentioned earlier.

In addition to the legal scrutiny that citizens can do without in dealing in dollars on the black market, there are also the risks of the dollar’s extreme volatility against gold, and the tendency of individuals to store their financial surpluses in gold and sovereign government bonds, which are guaranteed to pay and pay attractive semi-annual interest under a successful government program offered to the public, as well as in debt instruments that can be discounted or traded on the local secondary market.

Therefore, all these factors have truly helped reduce demand for the dollar in parallel local markets, without overlooking the role played by hypermarkets in a defensive and price stability policy that has disrupted the role of the parallel market and its price impact on consumer prices and the stability of the competitive market throughout the country. This is a successful experiment that has absorbed the fluctuations of the black market to maintain the stability of living standards, as was the case in the past. This is a successful aspect of the success of the trade policy in our country today. Let’s not forget the rush to buy gold at very high costs at the peak of the gold asset cycle or its highest price levels, replacing the purchase of local dollars, amid veiled, unconfirmed threats circulating on the street that the Federal Reserve will write off generations of cash dollars for reasons that conflict with the interests and politics of the United States.