The Governor of the Central Bank of Iraq Talks About the Exchange Rate and Inflation

As the governor of the Central Bank, Ali Al-Alaq revealed the success of monetary policy in reducing inflation, and he also mentioned the reasons for terminating the industrial initiative and for imposing interest on housing loans.

During an interview with the Iraqi News Agency (INA) and "Economy News," Governor of the Central Bank Ali Al-Alaq highlighted the bank's perspective on the exchange rate being closely tied to the overall price levels in the country. He also noted that the bank has effectively met importers' needs at the official rate and emphasized that their monetary policy has effectively controlled inflation, resulting in a decrease. This remains a top priority for the Central Bank in achieving success with its cash policy.

"Maintaining the general level of prices and the low inflation rate indicates the success of monetary policy, especially after real traders engaged in the conversion process at the official rate, which gave traders confidence in conducting foreign trade."

As for the electronic platform, he noted that "the electronic platform encountered many difficulties at the beginning of its work, leading to some reluctance to join," noting that "the implementation rate in the electronic platform was low."

He highlighted the importance of utilizing electronic platforms for external transfers, as it mitigates the risks of local and international sanctions for all parties involved. He cautioned against unscrupulous traders who thrive in chaotic environments and assured that the Central Bank is collaborating with the government to address this issue by monitoring and tracking these groups. He also mentioned that 90% of the Central Bank's sales are allocated towards remittances and external transfers.

In this case, the transactions are going smoothly and at the official rate (1320), but there is a problem with the cash aspect, which accounts for 10 percent of internal daily sales, noting that "this is enough to meet the needs of travelers, but some are trying to dominate by withdrawing the quantity allocated to travelers, which increases the cash price, and these parties are detected and carry out illegal and criminal activities."

Al-Alaq unveiled the method of creating a cash sales system for travelers within the exchange company's equipped system. This solution aims to address any deficiencies and disallows duplication or false claims by travelers. It also refutes the notion that there is a plan to cease selling cash dollars to travelers. The Central Bank reassures that it has no issue meeting legitimate requests under specified categories, such as travelers, students, patients, and special transfers. These services are offered through financial transfer companies such as Western Union and Semen Cram.

It was explained that "the electronic platform is being gradually replaced by direct transfers between Iraqi banks and correspondent banks, which are mediated by an international audit company, with the Central Bank cutting 60 percent of transfers that don't go through the platform." This speeds up transfers, entangles relations with global banks, and keeps them on track."

He believes connecting the exchange rate to cover the public budget shortfall is incorrect. He emphasized that it is the Central Bank's duty to set monetary policy and determine the exchange rate based on established guidelines to achieve the monetary policy goal. In addition, he mentioned that the claims of Iraq losing 27 trillion due to changes in the exchange rate are flawed and that 30 percent of oil revenues do not go to the Central Bank as they are used for external payments by the Ministry of Finance. Lastly, he stressed that tying the exchange rate to balancing the budget should be avoided.

US Treasury "During her visit to Iraq, the US Assistant Secretary of Treasury praised the Central Bank for regulating external transfers, applying compliance rules, combating money laundering terrorist financing, and coordinating directly between the Central Bank and the US Treasury.

Sanctions on banks He noted that "the Central Bank is conducting a review and scrutiny process in diagnosing violations involving the 14 banks that have been restricted and denied access to the dollar," stating that "the Central Bank has indicated that the 14 banks have responded and are complying."

According to him, the US does not limit the demand for the dollar, and they coordinate cash shipments through an annual agreement. He emphasized the Central Bank's preference for non-cash payment methods, such as Visa and Mastercard, which have seen a significant increase in usage in recent months. This is a positive sign that lessens reliance on cash and reduces the burden on companies to obtain physical dollars.

"There are ongoing negotiations on the Iranian side to regulate the import process so that Iraq won't be exposed to any problems by violating sanctions and agreements," he said, adding that "the Central Bank will reach a clear formula in regulating the trade process, especially since part of it is through barter."

An agreement was reached to settle Iraq's debts incurred by its imports of Iranian gas through a new payment method.

The adoption of new technologies

"As part of the process of facilitating external transfers by opening direct outlets in the currencies of the countries we deal with, we are working to adopt the UAE dirham, Turkish lira, Indian rupee, and euro," he said, noting that "we have a 3 billion dollar trade balance with India, as well as high import figures from the UAE and Turkey."

According to him, the central bank has advanced in its understanding of the currencies of those countries, which will facilitate external transfers.

It aims to ensure the Iraqi dinar's supremacy in internal transactions rather than foreign currencies, which are being reduced. It is a multifaceted and multiparty campaign. There is a gradual transition process within the Prime Minister's directive to limit dealings with the Iraqi dinar internally and oblige companies to do so, al-Alaq reports.

Housing Initiatives and Industrial Initiatives

The industrial initiative is still underway, but the funds approved for it have been exhausted, which amounts to more than 13 trillion dinars in lending initiatives, according to Loans Al-Alaq, noting that "the Central Bank has increased the interest rate on the housing initiative to 2 percent, which is a low rate when compared to international countries."