Iraq’s Central Bank says it will continue its daily hard currency auction, where it sells dollars to banks and companies that engage in trade importation, as it seeks to manage inflation.
“We have to put the dollar currency, which arises from oil exports, in the market, otherwise the country will suffer from major inflation,” Ali al-Alaq, Central Bank governor, tells MEED.
MEED understands Iraqi dinars raised from the daily sale are given back to the Finance Ministry. "The auction provides coverage for our people, we are just acting between [banks and traders] and the Finance Ministry,” Al-Alaq says.
MEED understands that the Central Bank sets the dollar-Iraqi dinar exchange rate, which currently stands at $1:ID1,250.
Faisal al-Haimus, chairman and acting CEO of the government-owned Trade Bank of Iraq says he also expects the currency trade to continue as “it has a stabilising effect on the currency and helps investments coming into the country.”
Some critics have previously said the practice, which has been observed since 2004, has encouraged widespread money laundering in the past, including smuggling of millions of dollars to countries that include Iran.
MEED understands new measures have been adopted by the Central Bank to address the issue including banning any bank or company with a capital of less than $400,000 from participating in the currency sale.
MEED earlier reported that Iraq plans to raise $2bn in the global bond market in 2018 to finance expected budget deficit.
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