Adjustment to the exchange rate
The Central Bank of Iraq explained in a statement, the reason for the decline in the exchange rate of the dollar in the parallel market – especially in February – from the official selling rate after the change of price by the Bank at the end of December 2020, and explained the central decline in what it called the “shock of the domestic market” which needed a period of adjustment to the adjustments that occurred between traders (wholesale, retail, singular) and wholesale settlements with banks, where imports declined to levels severe, and then lower demand for foreign currency.
However, this interpretation, based on the market mechanism, did not take into account the impact of the political space on this mechanism, as the apprehension of many of the public, including many traders and speculators, continued to escalate at other times and decline, according to statements and promises about influencing the central decision and the intention to undo it in favor of slogans, which were employed to win positions, without taking into account the nature of the variable that requires preparing for the flow of foreign investment and establishing an investment climate, led by allied capital of globalization capital in the region, which requires action on several axes.
In order to achieve this trend, the exchange rate did not rise in order to achieve this trend, the exchange rate in the parallel market did not rise, until after the approval of the budget, and to ensure that the relevant authorities are continuing their policy irreversibly, to create a competitive environment that protects the local product from the low prices of goods produced in the countries of geographical neighboring and preparing for monetary stability, encourages foreign capital to enter the Iraqi arena in a secure, legal and stable monetary atmosphere.
But adjusting to the exchange rate will not take its attractive form of investment, except by liberalizing the exchange rate and creating monetary stability in an atmosphere of free exchange and trading to ensure the movement of capital to and from within Iraq, without any effect on the difference in the value of the exchange rate with the other one (currency).
To ensure investment accounts in feasibility studies developed by investors, they are keen in financial feasibility studies to ensure that the price in the parallel market does not change during the life of the project to achieve the feasibility of the establishment of the project, as well as the importance of competitiveness to protect the local product, which is likely to adopt the method of “managed float” in the next step in conjunction with the increase of central reserves, which will contribute to giving more freedom of maneuver to those in charge of monetary policy, and ensuring adjustment to parallel market fluctuations to reach for stability.