Clare » November 9th, 2023
Trade exchange between Iraq and the UAE increased to $26 billion
Trade exchange between Iraq and the United Arab Emirates increased by 7% in 2023 compared to 2022 to reach $26.7 billion after it was $25 billion last year.
Economist Manar Al-Obaidi said in a statement, a copy of which was received by Al-Furat News, that “despite the decline in re-exports of goods from the Emirates to Iraq by 4% and the decline of non-oil Emirati exports to Iraq by 18%, Iraqi exports to the Emirates increased by 91%.” To reach $6.7 billion, compared to $3.5 billion last year, supported by exports of oil derivatives and exports of precious metals, specifically gold, from Iraq to the United Arab Emirates.
He pointed out that “the UAE is considered the first trading partner of Iraq after China, with which the volume of trade exchange amounts to approximately 50 billion dollars, then the United Arab Emirates with 27 billion dollars, then Turkey and India.” LINK
Between speculation and smuggling…the rise in the dollar paralyzes the markets with an “imaginary recession”
The country’s foreign currency reserve is the largest in Iraq’s financial history, exceeding 100 billion dollars, and at the same time constitutes Iraq’s central reserve wallet, and most of the market demand to finance foreign exchanges for the private sector is done through those official reserves, which are offered by the monetary authority. , through its platform at the official exchange rate of 1,320 dinars per dollar.
This was reported by the Prime Minister’s Advisor for Financial Affairs, Mazhar Muhammad Saleh, who indicated a demand for cash dollars to finance commercial operations of very specific commodities, usually no more than five commodities.
Saleh explained during his talk to Shafaq News Agency, “Forces from within the market are trying to purchase it from outside the official commercial mechanisms, by resorting to obtaining cash dollars from the parallel market (a market that constitutes only 10 percent of the market’s need for foreign currency) to finance their trade.” “.
He stressed that these are “commercial actions that are not legally recognized by the financial, commercial and banking departments, and are carried out for many reasons, including tax or customs evasion or quality control.”
The Sudanese financial advisor continued by saying, “The main reason for controlling the parallel market is to combat illegal commercial activities above all else.”
Saleh pointed out, “The state is currently undertaking a policy of defending economic stability, especially in providing sufficient commodity supply at always moderate prices, in two directions.”
The first, according to Saleh, is “providing additional supporting food and medicine baskets, construction baskets and high-demand spare parts, and purchasing them at the official stable exchange rate, through the cooperation mechanism between the state and the private sector.”
As for the second trend, it is “the monetary authority adopting new mechanisms, by providing liquid foreign currencies in addition to the dollar (and from a basket of various foreign currencies), to meet travel needs according to the traveler’s destination, especially for Hajj, Umrah, and tourism in its various aspects, and for various neighboring and distant countries.” According to Saleh.
He stated, “The aforementioned policy package aims to contain the noise made by foreign currency speculators in the parallel market, in order to profit at the expense of economic stability, and that the basic trends in economic policy are achieved by isolating the effects of the parallel or black market and the limitations of its illegal activities, from the stability of the system.” total price in the country.
Smuggling is organized for two reasons
For his part, the economic expert, Nabil Al-Marsoumi, considered that “what is happening is not a speculation operation with the black dollar in the parallel market and the cash dollar with the aim of making profits by taking advantage of price fluctuations, but rather an organized smuggling operation of the traveler’s dollar or the cash dollar, for two basic reasons.”
Al-Marsoumi stated to the agency, “The first reason is to pay for some goods imported from abroad, which are not included in the electronic platform, including (gold, drugs, alcoholic beverages, cigarettes).”
He pointed out that “some of these goods have a very large value, as Iraq imports cigarettes at about a billion dollars annually, while the value of alcoholic beverages is not less than a quarter of a billion dollars annually.”
Regarding the second reason for dollar smuggling, the economic expert attributed it to “the strong demand for the dollar in the parallel market due to the need for the dollar in order to settle commercial exchanges, or Iraq’s imports of Iranian goods, which amount to 10 billion dollars annually.”
He added, “This is because Iran and Syria are also among the countries sanctioned by the United States, so commercial transactions cannot be settled with them through bank transfers. Therefore, the parallel market is resorted to, and the intense demand for a scarce dollar leads to higher prices.”
Al-Marsoumi said, “The Central Bank will not be able, no matter what it does, to reduce the size of the gap between the official and parallel prices, as long as trade continues with the countries sanctioned by the United States, and as long as there is also a large segment of travelers to the sanctioned countries, especially Iran.”
He explained, “When travelers do not get the dollar at the official price, they resort to the dollar in the parallel market, and this increases its price,” revealing that “Iraqi travelers demand about 3.5 billion dollars annually from the parallel market.”
Al-Marsoumi concluded by saying, “All of these reasons have led and will lead to a widening of the gap between the parallel and official prices in the Iraqi market.”
The rise of the dollar causes “stagnation of market movement, and the merchant stops making payments, buying and selling, despite the presence of a mass or liquidity of cash, and this is called (imaginary recession) as a result of the instability of the exchange rate,” according to the Vice President of the Baghdad Chamber of Commerce, Hassan Al-Sheikh.
As for the real economic stagnation, according to what Al-Sheikh saw to Shafaq News Agency, “it is based on the data of the lack of cash liquidity among the citizen, offset by large commodity dumping, in light of the lack of purchasing power. However, Iraq has strong financial capabilities, but the exchange rate is what Determines market movement.
He noted that “the government’s printing of a monetary mass also affects the exchange rate, as whenever a large monetary mass is pumped into the market with no dollar available, the demand for the dollar will increase as it is considered a safe haven for the citizen’s savings, and even for transactions,” explaining that “the merchant is not a speculator.” As some accuse him, he sells in dollars in order to maintain his capabilities.”
The Sheikh confirmed that several strategies were proposed as a matter of consultation to resolve this crisis, but the government did not take them up, calling for “working to create an attractive environment for investment, through stabilizing the exchange rate, so that the merchant and contractor feel that his money is safe and that he can invest within the country.” LINK
Source: Dinar Recaps
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