10 Reasons Behind the Decline in the US Dollar Against the Iraqi Dinar
The exchange rate of the dollar against the Iraqi dinar has witnessed a significant decline recently. This decline is due to a group of intertwined economic and procedural factors, which vary in their level of influence but, together, have contributed to strengthening the dinar, according to the economic expert .Manar Al-Abidi.
And as follows – according to: Al-Obaidi The most prominent of these reasons:
1- Economic contraction and declining consumer confidence.
The state of uncertainty facing the Iraqi market, as a result of the economic slowdown, has led to a decline in the confidence of individuals and institutions in spending, which has negatively impacted the volume of public demand, thus reducing the need for the dollar as a stimulus for trade.
2- Halting government investment spending
. The government’s focus on operating spending rather than investment spending has led to a decline in economic activity. Since the general budget is the primary driver of economic activity, reducing investment spending has reduced aggregate demand, including the demand for the dollar.
3- Tightening control over border crossings.
Government measures to limit smuggling and regulate relations with Kurdistan Region It contributed to reducing the phenomenon of inflated invoices, which reduced the unreal demand for dollars in the parallel market.
4- Traders’ shift to the formal banking system.
Markets witnessed the entry of a large segment of traders into the formal banking system, and their reliance on the official dollar exchange rate through approved platforms, which reduced the volume of trading in the parallel market and eased pressure on the dollar.
5- Decline in re-exports.
The decline in re-exports of goods to neighboring countries led to a reduction in demand for imported goods, which directly reflected a decline in the need for dollars to finance these trade operations.
6- Settling the dues of major companies in petroleum products instead of cash
. The government proceeded to settle a portion of the dues of foreign companies in black oil and naphtha instead of cash, which reduced reliance on dollars sold by the Central Bank and increased their supply in the market.
7- Preparations for the electoral process
. With the start of the election season, the volume of spending related to the election campaigns increased. This spending is often financed from cash reserves stored in dollars, which necessitated converting large amounts of these reserves into dinars to cover campaign expenses, thus increasing the supply of dollars.
8- The increase in the number of foreign visitors and arrivals
contributed to the increase in the number of arrivals to Iraq Introducing large quantities of foreign currency into the local market, which provided an additional source of hard currency outside the framework of central bank sales, and contributed to increasing the availability of dollars.
9- The cessation of illicit trade as a result of the closure of the borders with Syria
The closure of border crossings with Syria contributed to the reduction of smuggling and illegal trade, which had been heavily dependent on dollars on the parallel market. This led to a further decline in demand for the dollar.
10- The decline in the issued currency and the withdrawal of some of it from the market
.Central Bank of Iraq By withdrawing part of the dinar money supply from the market, this led to a double demand for the Iraqi dinar against the dollar. This balance in demand levels between the two currencies helped strengthen the value of the dinar and raise its exchange rate against the dollar in the parallel market.
Al-Obaidi stated that these are the main reasons that led to the decline in the exchange rate against the dinar. The question remains as to the extent to which each reason affects the official exchange rate, and there may be other reasons. I believe that the sequence of reasons above reflects the importance of each factor on the exchange rate in the parallel market.
Alsumaria.tv