Iraqi government cracks down on exchange companies to control rate at free market

Iraqi dinar has been sliding against the dollar as the Federal Reserve Bank of New York tries to stop the flow of greenbacks to Iran, Syria and Lebanon

Iraq's police raided two of Baghdad's largest currency markets in an effort to stabilise the exchange rate on the streets. EPA
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Iraqi security forces raided two of Baghdad's biggest markets for the US dollar on Saturday in an effort to control the exchange rate, a security official and traders told The National.

Several traders were arrested at Al Harithiya and Al Kifah bourses, according to an Interior Ministry official and two traders.

Earlier on Saturday, Prime Minister Mohammed Shia Al Sudani announced his government has taken more measures to support the dinar.

“We have adopted a number of decisions to back up the Iraqi dinar and its stability,” Mr Al Sudani said at a ceremony to mark the death anniversary of a senior Shiite cleric in Baghdad.

“We warn those who exploit the crisis,” he said without elaborating.

It is still unclear how many traders have been arrested and there is no official statement yet from the government on the operation.

Since 2004, the Central Bank of Iraq has sold US dollars at a foreign currency auction as one of its means of maintaining monetary stability.

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

As of late 2020, the official rate set by the Central Bank of Iraq for banks and exchange companies was 1,182 dinars to the greenback, while the rate on the street was around 1,200 dinars.

Since then, the government devalued the local currency to 1,460 dinars to the dollar for banks and 1,470 dinars for individuals because of a liquidity crisis caused by a drop in the price of oil on the international market.

But since last month, the Iraqi dinar has wavered against the dollar as the Federal Reserve Bank of New York introduced measures to stop the flow of dollars to sanctioned countries.

It has blacklisted several Iraqi banks for their suspicious foreign transactions, while the new scrutiny measures have been brought in to scrutinise the process of releasing money from the US to cover the imports and other needs, a CBI official told The National last month.

That has pushed the dinar exchange rate in the black market to more than 1,500 to the dollar, fuelling public anger over soaring goods prices.

On Saturday, the exchange rate on the street hovered around 1,650 dinars to the dollar.

The Iran-backed Iraqi government has been trying to control the exchange rate to no avail, blaming the US and saying traders were manipulating the exchange rate.

Updated: January 21, 2023, 1:04 PM