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CURRENCY AUCTION OVER BURDEN THE IRAQI ECONOMY

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In the midst of political and economic crisis in which Iraq faces today , its economy is facing large challenges that are the largest in its history, starting from its structure ,and its rentier nature and that was the main focus of its successive crises and especially during the past two years because of the collapse in oil prices and slumping later, not to mention the political and security reasons that accompanied the occupation of the territory and vital cities in the north of the country.

Rentier economy in Iraq depends entirely on oil revenues, which constitute more than 90% of its revenues , and as a result of crisis of oil prices, the Iraqi economy has received numerous tremors internally and externally that toppled its credit rating to “negative” by the global agency “Fitch” .

We discussed in previous articles the issue of the currency auction in Iraq, and made it clear the size of the enormous waste that occured under the currency auction, and how the currency auction exceeded the revenues of oil, which made us to shed light on the foreign reserves, and that this auction may exceed to sell some of the foreign reserves of the Central bank where oil revenues arrived in the first quarter of this year, to 3 billion and 269 million dollars, while the total central bank sales of the currency in the same period amounted to 5 billion and 821 million dollars, and of course this difference is too large, and raises doubts about the figures where this amount was not for spending on imports because the latter were not the size of the revenue, and some also wondered who was to buy at this auction and for whom?

According to the inquiry of the committees of the House of Representatives of Iraq and international reports, it has been wasted and looted the amount of 312 billion dollars over the past years, they are proceeds of oil pumped by Central Bank of Iraq to the market, most of which had been transferred abroad. Today after the persistently high exchange rate of the US dollar against the Iraqi dinar in the local markets and the absence of the real role of the Central Bank to address this problem, it seems the Iraqi dinar is in danger of collapse , thus rising inflation and entering into a severe economic crisis. Therefore, the continuation of the central bank to sell the dollar in quantities larger than Iraq ‘s income from foreign currency as a result of the export of crude oil is a service for the corrupt , called by the term “whales” and cost Iraq losses of hundreds of billions of dollars, in addition to the billions that were stolen over the past years.

According to private information obtained by the Rawabet Center for Research and Strategic Studies for a meeting between the number of banks and banking owners in Baghdad in Jadriya and the theme of the meeting was about the dollar and the need to reduce its price on the black market and number of whales threatened the auction to issue a decision to limit the auction with a limited number of banks , and some of them said that they were able to control all aspects of the state , and the price of the dollar and they are refusing to sell the dollar existed in their accounts abroad , and it was estimated by one who attended the meeting to amount $ 350 million exists only in five people only, or five banks, and according to sources of Rawabet center , Mr. Prime Minister Haider al-Abadi, is following this issue carefully and that he considers issuing important decisions which exempt officials at the central bank from office and to inform some of state officials and political parties of their links to some of the private banks and the prime minister in waiting to complete the picture he has , and follow-up if the operations of sale for the benefit of reliable banks or not, to take a very critical decisions, including the stop of number of banks from entering the auction till to decide on lawsuits filed against it .

It is expected that there will be a reduction of the dollar to avoid penalties that may be imposed by the Prime Minister on the banks and those violators. Once again, we will address the subject of an auction in the Iraqi Central Bank taking in to the consideration the importance of this file for the Iraqi economy, where the central bank sells in its daily auction of dollar amounts sometimes exceeding 130 million, mostly in remittances and is priced at 1182 dinars to the dollar.

The thorny issue here, is the difference between the selling price in the market which arrive in the market to 1300 dinars to the dollar, while the exchange rate is sold to partisan and influential bodies up to 1182 per dollar, according to quotas, who in turn sell it at the prevailing price of the market. Here we refer again to the currency auction and its operations which constitute a big burden on the Central Bank of Iraq and the economy in general, which of course is a window to support specific destinations as we mentioned, thus it is considered a real blight on the central bank, and its cash reserves. The data suggest that Iraq’s debt is today 77% of GDP, while the safety ratio of public debt according to GDP is between 60-70%. The estimated loss of Iraq, hundreds of millions of dollars because of the control of mafias and whales on the market through the monopoly of the currency auction for certain destinations, and dominate them. It is indicated that the price of US dollar exchange rate in the Iraqi market is of 1310 dinars , selling price, while the purchase price is of 1,300 dinars per one dollar.

As it is known, the dollar is the main engine of commodity markets in Iraq, as the country imports most of its overseas markets . The US dollar was trading in the Iraqi market this week at 1310 dinars, compared to about 1129 dinars to the dollar before the outbreak of war in Mosul, which experts see as a sign of the weakness of the central bank’s policy. This increase is the result , according to the opinion of the experts , of the Central Bank’s policy, and the decline of the dinar exchange rate against the dollar caused by the adoption of the central bank of some private banks and not others in an auction of the sale of the currency and the weakness in monitoring the performance of these banks. “

Over the past 13 years, Iraq has become an arena for the corrupt, a group of influential Iraqis have led the looting of public money of a very large operations, and Iraq’s coffers have become empty, and this flaw was revealed by the collapse of oil prices two years ago .Large and enormous challenges facing Iraq economically and politically, and the excesses over the money of Iraq and its potential to the benefit of influential figures without supervision or follow-up, which put on the Iraqi government the responsibility for legislation of a strict law along the lines of other countries, and monitor the work of the central bank and the auction of the currency, which has become today as a destructive element of the economy Iraq, as well as accounting for the corrupt lest the Iraqi economy to reach to closed tunnel that can not be returned from it.

Unit Economic Studies

Rawabet Research and Strategic Studies Center

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