Iraq's dollar gap hits 2,900 dinars, widest since 2003

Summary

• The official-parallel dollar gap widened to 2,900 dinars in September, the largest since 2003.
• Lawmaker Amer Abdul Jabbar put losses at 21 million dollars daily under the previous government.
• Daily losses reached 43.1 million dollars in the current government's first 50 working days.

The latest

The spread between Iraq's official dollar rate and the parallel rate in exchange shops widened to 2,900 dinars per dollar in September, the widest margin since 2003, Shafaq News reported. Economists said the gap is generating heavy financial losses across the market, with the daily cost rising sharply under the current government compared with its predecessor.

Details

• The parliamentary figure: Lawmaker Amer Abdul Jabbar said in an earlier statement that Iraqis lost 27 billion dinars to the gap between the official and parallel rates over 1,295 days, the full term of the previous government, an average of 21 million dollars every 24 hours.
• The sharper rate: Losses over the first 50 actual working days of the current government averaged 43.1 million dollars every 24 hours, roughly double the previous government's daily average, according to figures cited by Shafaq News.
• The market rate: Shafaq News also reported that the parallel exchange rate reached 1,600 in recent days, a separate figure presented in the same report alongside the 2,900-dinar spread, with no reconciliation offered between the two.
• Not a reserves problem: Economist Ali Daadoush said the gap does not necessarily indicate a shortage of foreign reserves, but reflects a mismatch between dollar demand and the official channels available, compounded by restrictions on external transfers, informal trade and speculation.
• The import cost: Daadoush said the gap raises the cost of imports that cannot pass through official channels, pushing traders locked out of the formal window to buy dollars at the higher parallel price.
• The proposed fix: Narrowing the gap requires wider domestic use of the dinar, stronger customs oversight, curbs on informal trade and the development of a correspondent banking network, Daadoush said.
• The arbitrage: Exchange dealer Osama al-Mushrifawi said large traders buy at the official rate and sell at the parallel rate, and attributed part of the gap to government support directed only at large companies while small firms are excluded.
• A platform for shops: Al-Mushrifawi proposed a dedicated platform allowing shop owners to import goods at the official rate, bringing a segment of demand currently served by the parallel market into the formal system.
• The banking view: Banking expert Mustafa Akram Hantoush said unifying the exchange rate would represent economic stability, but the parallel market reflects demand outside the official platform, which does not cover small traders.
• The inclusion argument: Hantoush said bringing small traders inside the central bank framework would help shrink the parallel market, since their dollar needs are currently met entirely outside the official window.

Background

Iraq operates an official dollar rate alongside a parallel market rate in exchange shops. The difference between the two has widened to its largest level since 2003, the year Iraq's current monetary and trade framework began taking shape.

Between the lines

Three of the specialists quoted converge on the same diagnosis: the official window serves large traders while smaller importers are pushed into the parallel market. That framing recasts the gap as a structural access problem rather than a currency shortage, consistent with Daadoush's point that reserves are not necessarily the issue. It also explains why both the dealer and the banking expert propose inclusion mechanisms rather than rate adjustments.

What's next

Watch whether the central bank moves to cover small traders through a dedicated import platform, and whether the 2,900-dinar spread narrows or sets a new post-2003 record in the coming weeks.

Source: Shafaq News