On Monday, reliable sources reported that the Ministries of Finance and Planning had a candid meeting with the governors. The meeting revealed a looming threat to the Central Bank of Iraq.
According to sources interviewed by “Jarida”, the main issue in Iraq is not the lack of dollars, but rather the depreciation of the dinar. The government sells oil in dollars and then delivers those dollars to the central bank. The central bank, in turn, sells dollars to importers so they can buy goods and withdraw the Iraqi dinar from circulation. This causes the dinar to lose value, which is the root of the problem.
According to her statement, the Iraqi Central Bank transfers the funds received from the sale of the dollar to the government through the Ministry of Finance. This money is then utilized for various purposes, including paying salaries and funding projects. As a result, merchants receive money and their demand for dollars increases, thereby continuing the economic cycle.
She pointed out that the government owns the dollar resulting from the sale of oil in the central bank, but American restrictions prevent the central bank from selling it to merchants.
During a recent conversation, she pointed out that the volume of dollar sales made by the Central Bank during the current year does not even cover the budgeted salaries item. This implies that the Central Bank had to purchase dollars and cover the shortfall using its cash stock of dinars, which are about to expire.
Sources have warned that the Central Bank of Iraq will face a difficult and dangerous decision in the near future. The decision is whether to print more Iraqi dinars and introduce them into the market. If this is done, it will result in an increase in the money supply, leading to a rise in inflation and prices.
During a recent discussion, she mentioned that the government may not be able to fund projects in all governorates due to a lack of liquidity. This was confirmed by the Finance Committee’s meeting with the governors, who complained about the lack of funding. She also referred to the explosive budget proposed by the government.
