Against the inflated prices of basic goods and services in the Iraqi market, the exchange rate of the dinar continues to decline against the dollar and foreign currencies, amid government attempts to deal with the recession, which economists describe as “the largest in decades.”
With the aim of revitalizing the economic movement, stopping the fluctuation of the dinar exchange rate, and controlling the smuggling of dollars and foreign currencies from Iraq to Iran and other countries, the Iraqi government is seeking to activate the electronic payment system.
And a statement issued by the office of the Iraqi Prime Minister, Muhammad Shia’ al-Sudani, after the cabinet session, which was held last week, announced work to activate the electronic payment system, as of the first of next June.
According to the statement: “The Council of Ministers approved the recommendation of the Ministerial Council of Economy, which stipulated that the Central Bank of Iraq should facilitate the procedures for granting licenses to collect bank cards using points of sale (POS), and reduce commissions on banks and agencies that use those devices.”
The decision requires all governmental, non-governmental, and mixed departments, trade unions, associations, and all centers where amounts are collected, to open bank accounts and provide point-of-sale devices for electronic payment by bank cards.
Step by step
The economist, Salam Sumaisem, enumerates the steps to be taken by the Iraqi government to respond to the electronic payment system, namely: electronic outlets, filtering remittances, and monitoring import permits and credits.
In her interview with “Raise Your Voice,” she points out that electronic payment reduces currency smuggling, but the problem goes beyond that, as she adds: “There are mistakes in the structure of the Iraqi economy. The issue is not exclusively related to the monetary authorities, which are the central bank and its relationship with the government. The issue is also related to The structure of the Iraqi economy and its dependence on imports and the need to remove the currency, which is the main problem, as well as the control of import companies, which are originally subsidiaries of banks that monopolize the dollar. These issues need structural solutions, not formal procedural solutions.
And she affirms: “The electronic automation of the outlets is an essential first step that must be followed by larger steps.”
Since last November, the exchange rate of the dollar has risen against the Iraqi dinar, without the Central Bank’s decisions being able to stop the decline in the dinar’s exchange rate, which recently broke the barrier of 1,650 dinars against one dollar.--
The Central Bank set the purchase price from the Ministry of Finance at (1450) dinars per dollar, and the selling price to banks at (1460) dinars per dollar, while the sale price to citizens was set at (1470) dinars per dollar.-
opportunity for banks
The economist, Hammam Al-Shamaa, sees electronic banking as an opportunity to increase cash liquidity in banks, by enhancing deposits in exchange for withdrawals, and explains: “Customers do not withdraw money when they deal with merchants through credit cards.”
In his interview with “Raise Your Voice”, Al-Shammaa excludes any effect of electronic banking, which the government seeks to implement, on the fluctuation of currency rates in the Iraqi markets.
He explains in this regard: “If the relationship between the local currency and foreign currencies changes, up or down, the purchasing power of the monetary unit will differ, whether it is electronic or paper, and this confirms that there is no relationship to the exchange rate with electronic banking.”
For his part, the Deputy Governor of the Central Bank of Iraq, Ammar Hamad Khalaf, described, in a statement to the official Al-Iraqiya news channel, the government’s decision to activate electronic payment in all joints as “important support for the Iraqi bank and economy.”
Khalaf continued, “The bank has been working to put this service into effect for years as a basic business strategy, to complement the salary settlement project that began years ago, and it supports reducing outlets for money exchange (cash) as a case that does not serve the Iraqi economy.”
Although the economist, Khattab Omran Al-Daman, emphasized the importance of the electronic financial system in reducing cases of exploitation and increasing prices practiced by some retailers, its impact on the dollar exchange rates will remain limited, since the system will deal with transactions concluded in Iraqi dinars and not in US dollars.
And the guarantor adds to “Raise Your Voice,” “The high exchange rates of the dollar against the dinar is due to the imbalance between the demand for the dollar and the quantities offered of it in the Iraqi markets as a result of the controls that the Central Bank has begun to implement, and therefore the stability of the dollar exchange rates needs quick and organized efforts from the Central Bank.” To achieve a balance between the forces of supply and demand, by ensuring the flow of dollars to importers directly, without prejudice to measures to prevent smuggling of dollars and money laundering.