Iraqi Prime Minister Muhammad Shia’ al-Sudani confirmed in statements on Tuesday that the decision to “change the exchange rate of the Iraqi dinar against the dollar is one of the prerogatives of the Central Bank, and we are committed to implementing what the Central Bank sees,” which some saw as a retreat from previous promises and positions of the president to lower the exchange rate.
The new prime minister indicated that the decision to “increase the exchange rate of the dollar is not accompanied by measures to protect vulnerable classes,” according to local media.
In 2020, the Central Bank of Iraq increased the exchange rate against the dollar to 1460 dinars, after being in the range of 1182 dinars against the dollar, in a move aimed at compensating for the decline in oil revenues at the time .
And the Sudanese prime minister in previous statements, before taking his position, expressed his rejection of the decision of the Central Bank, which he approved in agreement with the provisional government, led by Mustafa Al-Kazemi at the time, in which he asked said that it is necessary to reconsider the decision to “increase the exchange rate of the dollar to prevent its negative consequences.”
The head of the State of Law Coalition, Nuri al-Maliki, who supports the Sudanese, proposed on Wednesday to lower the exchange rate of the dollar to 1375 dinars.
– Nouri Al-Maliki (@nourialmalikiiq) November 2, 2022
The Coordination Framework bloc, which is led by al-Maliki and includes factions loyal to Iran, criticized al-Kazemi’s decision at the time to reject the exchange rate of the dollar into the Iraqi dinar.
Economic researcher Salam Sumaisem described the promises made by the current prime minister and the bloc supporting him regarding the exchange rate of the dinar as “populist promises aimed at flirting with citizens’ feelings, ” but on the ground they ” do not apply.”
In an interview with “Al-Hurra” website, Sumaisem explained that the decision to “determine the exchange rate of the Iraqi dinar is a purely economic and monetary decision, and not a political decision that governs the government,” and note that the determination of the current price has come according to a five-year economic, financial and monetary plan. Two years now, and we still have “at least three years to stabilize the exchange rate at its current levels.”
And the Iraqi economist, Mahmoud Dagher, believes that the change in Al-Sudani’s position regarding the reduction of the exchange rate of the dinar is “a sound thing”, as he met with the governor of the Central Bank, who explained to him that stability and independence of the country’s monetary policy.
In response to Al-Hurra’s inquiries, Dagher pointed out that “the Central Bank Act of 2004 limits the powers to determine the exchange rate and monetary policy to the Central Bank,” and therefore the Sudanese should not interfere in the matter.
But Adel Al-Manea, a member of the State of Law coalition led by Al-Maliki, said in a statement to Al-Hurra that the Sudanese government “continues with its decision to adjust exchange rates to accommodate the Iraqi dinar against the dollar.”
He stressed that “there is no going back on this decision,” noting that the process of adjusting the exchange rate will be gradual, and its first features will appear “in the draft budget law” prepared by the new government.
Al-Manea expects that the new government will aim to bring the exchange rate to the rate of “1300 Iraqi dinars to the dollar” and will serve the country’s economic goals during the next “important” stage.
And the Ministry of Finance announced on Monday the beginning of the preparation of the budget law for the year 2023, and the financial adviser in the ministry, Abdul Hassan Jamal, told the Iraqi news agency “INA” that “adjusting the dollar exchange rate is within the government’s policy, and the Council of Ministers is the one who makes the decision, but in the budget it has not been presented until now.”
Is there a need to lower the exchange rate?
The researcher, Sumaisem, warned that any decision to devalue the currency could result in a loss of no less than “52 trillion Iraqi dinars” to the Iraqi economy, stressing that such decisions should not be made “arbitrarily or emotionally .”
And she indicated that the current economic indicators do not reveal any “need that requires the exchange rate adjustment, and there are monetary and financial instruments that can be used to reduce the effects of inflation and help marginalized classes.”
This opinion is supported by the expert Dagher by saying that “all economic rules support that the exchange rate remains the same for several reasons, the most important of which is the stability of the currency.”
And he confirms that any change in the exchange rate against the dollar will not be in the interest of the Iraqi economy, but will serve the interest of “speculators” who want to exploit the exchange rate difference to their advantage without considering the interest of the economy as whole.
Dagher called on politicians not to “use the exchange rate decision in populist statements”, as he put it, noting that it causes unnecessary “waves of speculation in the market”.
The head of the Alwan Center for Strategic Studies, Haider Al-Barzanji, who is close to the coordination framework, hinted that the opposition to changing the exchange rate of the dinar was nothing more than political bickering, on the grounds that ” economic realism is distinct from political discourse,” according to his belief.
Al-Barzanji, a media commentator who defends the position of the framework and the forces involved in it, continued: “There is an economic reality that cannot be changed. Specialists say that the exchange rate cannot be changed until after 4 or 5 years.”
Before you criticize, you must understand that the statement came within the current economic reality, and complete the passage so that you understand, and I said that the issue of the dollar is difficult to change quickly except through a gradual mechanism
– Dr. Haider Al-Barzanji (@Hber_iq) November 2, 2022
And the Association of Iraqi Private Banks said in a statement issued last week that “returning dollar prices will negatively affect the economy,” stressing that “the slight drop in exchange will not reduce the prices of materials in the markets .”
Samir Al-Nusairi, the economic adviser in the association, thought in an interview with “conscious” that “the current slight drop in the dollar exchange rates is a kind of confusion practiced by speculators in the currency trading market by exploiting rumours. to achieve narrow interests.”
Al-Nusairi warned that “the process of change and return to the previous price of the value of the dollar against the Iraqi dinar will lead to great costs for the economy,” in addition to “catastrophic damage that the citizen will bear as a result of the problems that will occur in internal commercial and financial transactions.”
And the Central Bank of Iraq confirmed in a statement last week that “there are no intentions to change the exchange rate,” and in a statement to the Iraqi News Agency called on citizens “to accept the value of to preserve their money and stay away from what is rumored in the media.”