Opportunities to enhance financing of Iraq's foreign trade and its effects on the stability of the 2 – 2025exchange rate in Iraq for the period 200
Keywords:
exchange rates, foreign trade financing, foreign exchange windowAbstract
The exchange rate and controlling its fluctuations is a critical issue for most countries, especially developing ones. Fluctuations in the Iraqi currency exchange rate against foreign currencies, particularly the US dollar, have preoccupied the thinking and policies of successive governments. Due to the rentier nature of the Iraqi economy, the supply of foreign currency differs from the demand for it. This is in addition to other issues that emerged after the political change in 2003. These issues ranged from the printing of national currency abroad, the lack of control over all border crossings, and the inability to directly deposit all oil revenues into national accounts. This was compounded by negative transactions resulting from the mechanism for selling foreign currency through the Central Bank of Iraq's window and the adoption of unsound financing methods, which affected exchange rates. The figure is a prominent factor in the sharp fluctuations. The researchers used simple regression to measure the impact of total sales through the currency selling window on the nominal and parallel exchange rates using the statistical program AMOS VS.23. The research yielded a set of findings, the most important of which is that Iraq's reliance on the foreign exchange window as a primary source of financing foreign trade. The lack of transparency and adequate oversight has led to increased demand for the dollar and increased volatility in the parallel exchange rate, negatively impacting the stability of the Iraqi economy. Consequently, the research produced a number of recommendations, most notably the need to shift from reliance on the foreign exchange window to more transparent and efficient methods of financing foreign trade, such as letters of credit. This should also include strengthening oversight of foreign currency flows and linking all commercial and financial outlets under a unified management system under the supervision of the Central Bank and the Ministry of Finance
References
Open a direct account for dollar revenues collected by the Ministry of Finance at the Central
Bank of Iraq to achieve full sovereignty over Iraq's financial resources.
Link all Iraqi border crossings across the country under a single control and oversight, directly
and explicitly undertaken by the federal Ministry of Finance, without interference from any
governorate or region.
Entrust the task of printing and issuing Iraqi currency denominations entirely to the national
monetary authority within Iraq, represented by the Central Bank of Iraq.
Full reliance on documentary credits or any similar, modern method to finance Iraq's foreign
trade, recording all data on the trade transaction and its parties, including the traded commodity,
exporters, importers, and intermediaries.
Making the formulation of exchange rate policy the exclusive responsibility of the Central Bank
of Iraq, without government interference.
Enacting deterrent laws for commercial banks and money changers regarding foreign currency
dealings, in accordance with the controls established by the Central Bank.
Attempting to create national productive sectors with export competitiveness to eliminate the
rentier problems of the Iraqi economy.
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