The study noted that despite the success of the Iraqi central bank in fixing the exchange rate of the national currency through the process of connecting it with the American currency and preparing the proper atmosphere that has a positive effect on creating a stable environment in the Iraqi market that have to a certain extent led to restoring the confidence of businessmen and investors through relying on the policy of selling 30 million American dollars in the bank's daily auction , which achieved a stability in the remaining of the exchange rate of the Iraqi dinar at 1465 against the dollar in the past two years, this policy has resulted in negative consequences and has harmed the Iraqi economy.
The study, which was conducted by the administration and economy college in Al Basra university, has pointed out that the Iraqi central bank has used a significant part of the reserve of foreign currency for the purpose of fixing the exchange rate of the Iraqi dinar, and the continuation of such method would lead to using up this reserve, which, through time, would consequently result in that the central bank would lose its ability to maintain the equivalence value of the Iraqi dinar, especially as the sums that the bank uses of the dollar is so great and exceeds 7.5 billion dollars a year, which is equivalent to half of the oil revenues.
The study noted that the stability of the exchange rate of the Iraqi dinar as an ultimate goal for the monetary policy did not lead to the stability of the prices of commodities and services, which tended to the great continuous rise. The criteria of prices record show that they increased by 2.5% a month, which means the invalidity of this policy in reducing the rates of inflation in Iraq.
The study stated that this led to evaluating the Iraqi currency more than its value against other currencies, which represents an exaggeration in the Iraqi exchange rate against other currencies that led to the escape of capitals. Reducing the Iraqi exchange rate, for any reason, might lead the people to shift from dealing in the local currency to the foreign currencies to avoid potential loss. The study confirmed that for the monetary policy in Iraq to be effective and active in the economic environment, it should be a part of an efficient economic policy as each of the policies affects and is affected by the other. Maintaining the exchange rate of the Iraqi currency then increasing it at a later stage require, first of all, increasing the efficiency of performance in various economic sectors and increasing the commodity supply of the local production. This would later lead to increasing the purchase capacity of the Iraqi dinar, and consequently improving its exchange rate compared to foreign currencies, in addition to increasing the monetary budgets of commodity sectors, especially the agricultural and industrial, to secure the needs of the Iraqi market. The study said that it is not wise that the general budget of this year designates only 2% for agriculture and 8% for industry. Scientific planning is necessary at the time that agriculture and industry should be supported in an exceptional manner, similar to what developed countries do, such as the United States, which leads the globalization process as it did not hesitate in posing customs fees on its imports of steel, which is imported from Europe and China, when it became necessary to protect the American steel industry.
The study concluded that the cancellation of supporting the agricultural sector and freeing the foreign trade have participated in destroying Iraqi industry, which was, until recently, fulfilling the foodstuffs demands of the local market that is currently full of Iranian, Syrian and Egyptian, and even Kuwaiti, commodities.
This also applies to the industrial field. The continuation of this situation would increase the demand for foreign currencies, which would make the Central Bank subject to continuous attrition to maintain the exchange rate of the Iraqi dinar. It is impossible to continue such a process, unless procedures that reinforce the monetary and economic situation are taken, which would increase the capability of the state to execute more significant projects that are related to the daily needs of the local market. (Source) Jassem Dakhel Al Sharq Al Awsat