Most citizens in Iraq do not have a direct interest in the dollar and its exchange rates. The majority of the population consists of employees, retirees, earners, people covered by social protection, the unemployed, those with special needs, or those who do not have the ability to work. They manage their livelihoods with the dinar, which they receive through salaries, wages, subsidies, or other limited methods, often approaching the requirements of subsistence living. They generally do not require the dollar except in specific cases such as travel, study, immigration, or treatment.
Although the dollar has been involved in significant events in Iraq since 2003, including smuggling, waste, and money laundering operations, most citizens have not been affected by these issues. The Central Bank opened the currency window to prevent dollarization and protect citizens. Through this window, business owners trade dollars, which are used for imports that constitute a significant percentage of consumption.
Therefore, most Iraqis can obtain their needs for local and imported goods and services at almost stable prices because the dollar is insured for those who need it. This means that the poor can give up the dollar in exchange for the relative stability of prices in the markets.
The government of Mr. Al-Kadhimi ignited a crisis in the livelihood of the people by changing the exchange rates to 1,450 dinars per dollar. This change led to a decrease in purchasing power and a rise in prices which affected many categories of people, especially those with limited income. The change was not accompanied by any measures to compensate for the decrease in purchasing power. As a result, the destitute and limited-income people were forced to live with the new reduction in the price of the dinar without any change in the salaries of employees and retirees. This caused many weak-minded sellers and exploiters to manipulate prices, even though the exchange rates were no more than 1,480 dinars per dollar on the black market.
When the Al-Kadhimi government changed and the new government came, many people were relieved. Their first demand was a return to the exchange rates before the previous change. The prices of oil witnessed increases and the state treasury became saturated with money and reserves of gold and currencies. After the government of Mr. Sudan took over, it initiated a series of reforms that would affect the citizen’s livelihood. It decided to reconsider the exchange rate to be 1320 dinars per dollar. This measure was not what everyone wished for, but many considered it a good sign to reduce prices and reach a balance between family income and spending requirements.
The price of oil has increased, which is expected to improve the living standards of the people by lowering prices. In September last year, the country earned $9.494 billion from selling oil. However, it seems unlikely that such revenues could cause the price of eggs to increase from 6 to 8 thousand dinars within just a few days. The salaries of employees and retirees have remained the same in dinars, and the incomes of workers in the private sector are decreasing due to the recession in the markets.
Despite the government and the Central Bank’s efforts to control the black market dollar exchange rates, the situation remains dire. Currently, the exchange rate is 1640 in the markets compared to the official rate of 1320. This means that the Central Bank is selling over $240 million per day to meet import needs. However, if the market demand for the dollar is $50 million, then why isn’t there any impact on sales with remittances, which are ten times the demand in black? Furthermore, where do the billions go when the state covers travel needs and other cases? It is unreasonable that millions are smuggled in cash while the state has a flag, a constitution, security, judicial and regulatory apparatuses, and trillions are spent on it. This situation raises many questions, and the citizens are not to blame. Some experts predict that the price will exceed 1,700 within days and may cross the 2,000 dinar barrier in the upcoming weeks.
What is causing concern among those impacted by the rise in the dollar exchange rate is the unfulfilled expectations that lead to a worsening situation. This has been the case since February of this year. The economic advisor had predicted a stable exchange rate, but his predictions didn’t come true. Yesterday, the Prime Minister’s Advisor for Investment Affairs also expected the exchange rate to stabilize within two months in the parallel market. He pointed out that the country was trying to achieve in one year what it should have done in six, which has greatly affected the dollar exchange rate. He added that the rise in the dollar exchange rate was due to the presence of great corruption within a group of banks and banking companies that led to the smuggling of the dollar.
When asked if the price of the dollar would continue to rise, the answer was yes, it is possible that it will continue for a certain period of time. However, it is expected that within a month or two, the exchange rate will start to decline as 70% of trade in Iraq has moved to the electronic platform. On a related note, the State of Law coalition disclosed a new government project related to trade exchange between Iraq and three countries.
A leader in the coalition said in an interview that there is a new government project to adopt currencies other than the dollar to deal with several countries, including China, Iran, and Russia. He stressed that this project, if implemented correctly, will reduce the demand for the dollar in Iraqi markets, and the current rise in the dollar exchange rates in Iraq will not be able to be reduced by any party, whether it is the Central Bank or others, as long as the demand for it is high. With regards to America’s position on the new project, he made it clear that America has no relationship with this project, and it does not matter whether or not it agrees to the project to create a currency other than the dollar for Iraqi commercial transactions, as long as there is a will from Iraq and these countries.
If we rely on the statements that suggest prices will be controlled after two months or that the new plan for trade in non-dollar markets will bring stability, we must ask how the average citizen can manage their daily or monthly affairs. What guarantee is there that the prices for goods and services won’t continue to rise, especially when there is little hope of increasing salaries for employees and retirees? Any increase is tied to a budget that suffers from an annual deficit of over 60 trillion dinars, and our economy is heavily reliant on oil exports, which are subject to international variables beyond our control. We need practical solutions to address these issues and not simply rely on wishful thinking to fill our pockets.