Iraqi MPs push for extraordinary session over chaos in currency exchange market

Iraqi dinar has been losing value against the dollar as US authorities increase scrutiny of transactions from Iraq

A street money exchanger counts banknotes at Al Kifah stock market in Baghdad, as the value of Iraqi dinar against US dollar continues to drop. AFP
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Iraqi politicians are pushing for an extraordinary parliamentary session to discuss the Iraqi dinar's fall against the dollar, an MP said on Wednesday.

The Iraqi dinar has dipped sharply against the dollar since the beginning of December as US authorities have tightened scrutiny measures on foreign transactions from Iraq to stop dollars being funnelled to Iran.

Iran is reeling under US sanctions and its economic woes are causing widespread protests.

The Iran-backed Iraqi government has been struggling to control the exchange rate to contain mounting public anger over the soaring prices of goods.

One US dollar traded at 1,570 Iraqi dinars on the black market early on Wednesday, higher than the Central Bank of Iraq rate of 1,470 dinars.

“Sixty-seven lawmakers have already signed a petition to hold an extraordinary session to discuss the exchange rate issue,” MP Amer Abdul-Jabbar told The National.

“The parliament is a regulatory authority so we can invite the governor of the Central Bank of Iraq to discuss the issue and come up with recommendations to the government.”

A date for the session has not yet been set, he added.

The legislative body is in recession until January 9.

"If it is not possible to hold the extraordinary session then we will ask to have the first session after the recession on the exchange rate issue only," MP Raid Al Maliki said.

The Prime Minister and the Finance Minister could also be invited, Mr Al Maliki added.

"We want the government to tell us the reasons behind the issue, whether politically-motivated or something else, and if it is needed then we can hold the session behind closed doors," he said.

Corruption and money-laundering

To achieve monetary stability and to control the exchange rate on the street, Iraq has been selling dollars through a CBI-run foreign currency auction since 2004.

However, the process has been mired with accusations of corruption, money-laundering and the channelling of dollars to Iraq’s neighbours, Iran and Syria, using forged bills. Both countries are under punishing US sanctions.

Since then, the US has blacklisted a number of Iraqi banks that deal mainly with Iran. The US sanctioned Iraq's Al Bilad Islamic Bank for dealing with Iran's Islamic Revolutionary Guard Corps in May 2018.

In recent weeks, the US has complained to Iraqi officials that channelling of dollars to Iran has increased.

But Prime Minister Mohammed Shia Al Sudani's Iran-backed government, which took office in late October, has not taken any action.

Instead, it has applied some measures to control the exchange rate, including ensuring a flow of dollars at the official rate, without success.

Iraqi Prime Minister Mohammed Al Sudani urged the central bank to 'achieve stability in the exchange rate'.  AP

The chaos in the local exchange market has wreaked havoc in Iraq in terms of higher prices for goods. The country depends heavily on imported goods and raw materials.

During a meeting with the CBI governor on Tuesday, Mr Al Sudani “urged the Central Bank to achieve stability in the exchange rate and regulate the work of the banks”.

He stressed the importance of “taking necessary measures to fight illegal speculations and everything that impacts the local market”.

Iraq's Association of Private Banks said the rate had risen as a result of changes to the mechanism of foreign currency sales due to international requirements.

To reduce the exchange rate on the black market, the CBI offers dollars for individuals at the 1,465 dinar rate instead of 1,470 dinars to cover travel for the Hajj pilgrimage, medical treatment, study and buying online.

On Wednesday, the central bank announced that several private banks will operate during the weekend, Friday and Saturday, as well as Sunday, which is an official holiday, to meet the demand for dollars.

Iraq's oil revenue is deposited in an account at the Federal Reserve Bank of New York and Iraq withdraws from there either in cash or foreign exchange transactions to cover imports.

Early this month, it had about $96 billion in foreign exchange reserves, according to Mr Al Sudani.

Updated: December 28, 2022, 1:23 PM
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