Justifications For Changing The "Iraqi Dinar" Exchange Rate

by **GirlBye** Fri Oct 09, 2020 6:43 pm

On October 9, 2020
Iraq is going through very sensitive conditions, as the Iraqi economy is facing a real challenge after the utter failure to find alternatives to selling crude oil, prosthetic solutions, and poor control over public expenditures, and with the absence of sovereign investment funds that secure additional imports and a portfolio to protect the future of generations, especially in times of crisis.

Aid request to pay salaries

Iraq today has reached a request for aid in order to pay the salaries of employees and retirees because what enters the treasury is not equal to less than half of what Iraq needs to cover salaries only, although the government has solutions if the will is provided to improve the financial position and fill the budget deficit, by reducing public spending and controlling Wasted resources and support for the local industrial and agricultural product and other economic solutions, the most important of which is the central bank’s approach and monetary policy that restores the balance of the dinar’s price against the dollar in the daily auctions to sell the dollar by the Central Bank of Iraq, by raising the subsidy slightly from the exchange rate in a way that achieves the price change at a specific and studied rate To avoid the issue of inflation.

Taking into account international economic variables

Our constant demand for a change in the exchange rate was based on a realistic vision that included all aspects of international economic variables due to the decline in oil prices and the Corona pandemic, as well as the chaos of imports, the loss of control and control over the border outlets, the volume of counterfeiting, corruption and smuggling through unofficial outlets, all causing the Iraqi market to be violated. And dumping it with inferior and cheap commodities and preventing the upgrading of the local product, which requires a review of the monetary policy to curb this chaos and achieve tax and customs revenues equivalent to the volume of imports, which we and with us many experts and specialists in financial affairs believe that the exchange rate should change, provided that it is accompanied by a set of supportive measures and decisions, to control Expected inflation.

The failure of the previous administration of the Central Bank of Iraq

However, the previous administration of the Central Bank insisted on continuing with the policy of fixing the dinar’s price against foreign currencies, under the pretext that changing the exchange rate would reflect on high prices and inflation and harm vulnerable social strata and other justifications that do not get fat or rich from hunger. The continued sale of the currency at a fixed exchange rate by the Central Bank will lead to the bankruptcy of the state and the collapse of the economic system in conjunction with the drop in oil prices and the abandonment of a million barrels of its share for the benefit of others in these difficult circumstances the country is going through,
The assumption that the survival of this equation, which is poured into support for imports, industries and exports of neighboring countries, will lead to the accumulation of goods in exchange for a cheap dollar that the exporting countries benefit from at the expense of the Iraqi economy stopping. The basis from which we started by demanding a change in the exchange rate is the fact that the state is not fully in control of the imports of the border outlets, including those in the Kurdistan region

Exchange rate change proposal

Therefore, we included the proposal to change the exchange by collecting tax and customs fees in advance from importers in the window of currency sale, and to clarify the matter, if we calculate the price of oil specified in the draft budget law at (56) dollars per barrel, meaning the rate of decrease is (15%), so the exchange rate is assumed ( 1300) dinars per dollar, and if it was levied by way of imposing (5%) for the tax and (15%) for the customs fee, and adding it to the exchange rate to become (1500) dinars per dollar, so we would have withdrawn the rug from the corrupt in the northern, western, eastern and southern outlets and we got On revenues from the state treasury, the monetary result to the state treasury every day is the sale of a dollar at a rate of (200) million dollars, and in the case of adopting the new exchange rate, it will be (60) billion additional dinars for each auction day, which is approximately (18) trillion dinars annually.

Conclusions:

First - Achieving revenues for the federal government’s treasury exceeding (18) trillion dinars annually from the amount of tax and customs, with a price difference at least.
Second - Elimination of currency smuggling, as imports will be real and in the amount of transferable sums.
Third - ending the phenomenon of tax and customs evasion at the border crossings.
Fourth - the submission of all ports to the authority of the federal government and thus solve the problem of imports of goods and goods from the ports of the Kurdistan region due to the preference in terms of taxes and customs fees.
Fifth - ending all tax and customs exemptions for institutions, government departments and others.
Sixth - ending the phenomenon of the mediator in selling dollars and commissions of private banks, because dealing must be with the real importer and not with speculators, which will be reflected in the development of the export sector for local products and the creation of job opportunities.
Seventh - Streamlined flow of goods and goods from the border crossings.

We expect the new administration of the Central Bank of Iraq, which has taken positive steps to correct the previous paths and approaches, which are in line with the reform plan, more decisions to create a real banking sector, and we hope from them to study the ideas and proposals presented by our council that serve the public interest.

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