Currency Auction ... "an outlet for corruption and a drain on money"

by **claud39** Tue Dec 01, 2020 6:31 pm

[ltr]Currency Auction ... "an outlet for corruption and a drain on money"[/ltr]

12/01/2020

Currency Auction ... "an outlet for corruption and a drain on money" Medium-2017-12-05-6d9121a39e

[ltr]{International: Al Furat News} In the year 2019, the Central Bank of Iraq sold 44 billion dollars of hard currency at the Central Bank auction (the window for selling currencies), mostly intended to cover the import of materials and goods that the country needs, stabilize the price of the Iraqi dinar and prevent inflation, according to data To the bank.[/ltr]

[ltr]However, according to Iraqi economists, the volume of Iraqi imports reached $ 18 billion, according to the economic expert, Manar al-Obeidi.

Iraqi experts warn of "currency leakage" outside Iraq due to "corruption" in the currency auction in the country.

Al-Obeidi says to the website that "there is actually a difference of about $ 30 billion between the volume of remittances abroad and the value of goods entering, which indicates that the currency auction does not do its proper duty to provide funds for the purpose of import."

The Parliamentary Finance Committee called on the words of a number of its members to "reconsider the issue of the currency auction." Committee member Ahmed Al-Saffar said in a press statement that "the issue of the currency window of the Central Bank does not exist in all countries of the world except for Iraq."

A member of the Finance Committee, Muhammad Sahib Al-Darraji, announced in a statement, on Monday, that he "submitted an official complaint to the Iraqi judiciary to stop the waste of hard currency and its smuggling abroad" through the currency auction.

Before the public prosecutor, Darraji requested and opened an investigation into the auction.

A journalist interested in Iraqi economic affairs, Bassem Al-Shara, says that "the currency auction has become a major obstacle to the liberalization of the Iraqi economy and it is only a front for financing currency smuggling operations, especially in the current year after revenues from crude oil have declined significantly."

Al-Shara says that "the auction sells large numbers of dollars a day that exceeds the needs of the Iraqi economy and does not return from them as goods except at rates that do not exceed 40 or 50 percent at best, and the rest goes to neighboring countries, especially Turkey and Iran."

The bank sells the US dollar at 1182 dinars for every dollar, but the exchange rate in the Iraqi market is about 1250 dinars per dollar, and exchange companies benefit from the currency difference.

But Salem al-Douri, a businessman from Baghdad, says that "the central bank sells about $ 200 million a day in currency, which is much greater than the Iraqi market’s consumption or its need."

Al-Shara says, "The Turks and Iranians talk about large exports to Iraq, but the ministries of agriculture, government agencies, and even private sector traders do not know the fate of these goods, and thus they are statements of misleading and smuggling of dollars."

According to Sharia, "the survival of the price of the Iraqi dinar is subsidized against the dollar that serves both countries and does not serve the Iraqi state and its industrial and agricultural production, which makes it more expensive to support the dollar than the importer."

And the currency auction serves its current form, according to Sharia, "many banks belonging to influential parties and gives them important profits with which they can face the interruption of financing, especially since the selling differences are large between the bank and the banks."

Although critics of the auction (the window) say that it turned the central bank into a "money exchange company", which is recognized by the central bank in a paper it issued in 2019 regarding the auction, when it compared proposed solutions to develop the auction work and reduce its damages.

The bank admits in the paper that the auction consumes effort and time that the bank was supposed to spend in supporting the Iraqi market and performing its real role, but the paper also said that it is not possible to completely cancel the auction, because this will cause great inflation in the Iraqi market, and also it is not possible to transfer it to a custody The Ministry of Finance or the Iraqi stock market because of "the lack of experience and the restrictions of the US Federal Bank," according to the paper.

The economic expert, Salam Sumaisem, says that "the rule of exchange liberalization requires the existence of a window for selling the currency," adding that any blocking of currencies will make the dollar price higher and this is not desirable.

But Sumaisem criticizes the "lack of jurisdiction" among those in charge of Iraqi monetary affairs, and says that it is possible to develop the auction work in a way that reduces the rate of leakage in hard currency outside the country.

The Iraqi economic expert, Manar Al-Obeidi, says that it is not possible in any way to cancel the currency auction because 92 percent of the Iraqi state’s imports are in US dollars and the Iraqi state must sell dollars to the central bank, and the central bank must secure the Iraqi dinar necessary to give it to the Iraqi government Against the sale of dollar imports.

Al-Obaidi added that the solution to reducing the impact of the auction is through maximizing the state’s revenues from the Iraqi dinar and providing local substitutes for the necessary imports.

Al-Obaidi takes on the current financial system not to link the central bank transfers to the customs authority to find out if the funds transferred abroad through auction enter Iraq in the form of goods.
Businessmen, such as Salem al-Douri, criticize the bank’s auction, which he says allows Iraqi money to be taken out of hard currency to buy non-essential items.

Al-Douri calls for floating the dinar and adopting the "difficult solution" in order to save the Iraqi economy.

According to Al-Douri, "The Iraqi pays a dollar for five kilos of Iranian tomatoes, and the central bank pays about a quarter of an additional dollar to reduce the price for the Iraqi citizen, and all these funds go out of thousands of different goods outside Iraq."

According to Al-Douri, "In the tomato example, the central bank can support the Iraqi farmer with this quarter of a dollar, and thus the foreign currency will remain inside Iraq, and the agricultural sector will develop, and this example can be generalized to other sectors as well."

The idea of floating the dinar means canceling the support provided by the Central Bank to the Iraqi currency and making it face foreign currencies without interference.

This decision will significantly reduce the value of the Iraqi dinar against the dollar, meaning that a commodity whose price is a thousand dinars may become two thousand or more, according to the league that says, "Perhaps the central bank should support the sectors of agriculture and industry first before lifting the subsidies completely, but the support." It must be lifted sooner or later.

The financial advisor to the Prime Minister, Mazhar Muhammad Salih says, "The stability of the Iraqi dinar exchange represents the stability of the external value of the national currency, and then the stability of the standard of living, and defending the stability of the exchange rate is one of the most important duties of the Central Bank of Iraq in achieving its objectives in building stability as a climate for economic growth." .

He indicated that "despite the current account deficit of the balance of payments to GDP, which is about negative 8% according to preliminary estimates; however, the Central Bank defends the exchange rate through its foreign reserves, and that this defense is dependent on the sufficiency of foreign reserves that have not Its red lines reach until now. "

Late last year, the Iraqi Integrity Commission revealed details of criminal cases related to the "currency auction" file that it is investigating, and talked about three different "tricks" used by government banks, including using people's accounts without their knowledge and depositing checks for others who do not have a balance.

According to the Integrity Commission, the cases included private and government banks, some of which claimed to have imported goods inside Iraq, but "no material has entered Iraq since 2004," according to the commission's statement.

Ammar Al-Masoudi[/ltr]

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