Through 5 factors, Iraq aims to bring the dollar exchange rate to “conformity”

Financial and economic advisor to the Prime Minister, Mohammed Shia al-Sudani, revealed on Tuesday five factors that could help narrow the gap between the official dollar exchange rate and its parallel market price, potentially leading to “convergence” between the two rates.

The official exchange rate of the dollar, approved by the Central Bank of Iraq, is 132,000 dinars per $100. Meanwhile, the parallel market exchange rate has approached 139,000 dinars over the past two days in Baghdad and the Kurdistan Region, representing a gap the government is seeking to bridge.

Mazhar Mohammed Saleh told Shafaq News Agency, “The decline in the value of the dollar on the parallel market, in favor of the Iraqi dinar, and its approach to the official rate, is due to several reasons and factors, the first of which is the ban on dealing in dollars domestically, especially in the real estate sector, which constituted a major deterrent to the phenomenon of dollarization.”

He added, “The second factor is the shift to a policy of foreign exchange bolstering through international correspondent banks, which handled foreign transfers after the Central Bank’s window ended at the beginning of this year, reducing the risk of resorting to high-cost informal financing.”

Saleh continued, “The entry of small importers into the formal financing system and their reliance on a fixed exchange rate for external transfers, which constitutes approximately 60% of total foreign trade, is the third factor in narrowing the gap.”

He pointed out that “the fourth factor is the expanding culture of using electronic payment cards in foreign currency among travelers, which has eased the pressure on demand for cash dollars, in addition to facilitating travelers’ access to their dollar share through airports, subject to clear controls.”

The fifth factor, according to Saleh, is “the price defense policy through the expansion of cooperatives for consumer goods and building materials, financed by imports calculated at the official exchange rate of 1,320 dinars per dollar, reflecting the integration of monetary, fiscal, and trade policies within the government program.”

The financial advisor concluded his statement by saying, “The fact that the difference between the official and parallel rates is approaching less than 4% indicates that we have entered the convergence phase, as this difference represents only the cost of transactions.”

Shafaq.com