Shafaq News- Baghdad

The gap between the official and parallel dollar rates in Iraq largely reflects limited access to official channels for obtaining dollars rather than a shortage of foreign reserves, economic experts told Shafaq News on Friday.

The parallel-market rate closed Thursday about 20% above the Central Bank of Iraq’s (CBI) official rate. The dollar traded at 157,300 dinars per $100 in Baghdad’s Al-Kifah and Al-Harithiya markets, compared with the official rate of 1,310 dinars per dollar.

The gap was also driven by restrictions on foreign transfers, informal trade, speculation, and market expectations, economist Ali Daadoush said, raising costs for imports that could not pass through official channels, adding pressure to prices, and increasing uncertainty for producers, importers, and consumers. Intermediaries, speculators, some exchange businesses, informal traders, and those able to obtain dollars at the official rate and reprice them outside formal channels could “benefit” from the gap.

Narrowing it, he said, would require stronger customs controls, reduced informal trade, wider use of the dinar in domestic transactions, improved correspondent banking links, reduced bank-transfer delays, and revised customs tariffs on some essential goods.

On September 19, the CBI said its reserves were sufficient to meet foreign-currency requests for trade financing, bank card settlements, and cash dollars for travelers at the official rate. It attributed the rise to speculation, market expectations, and what it described as exploitation of regional geopolitical conditions.

In an interview with Shafaq News, Baghdad currency trader Osama Al-Mashrafawi said smaller businesses and traders often could not obtain dollars at the official rate and therefore turned to the parallel market. He cited clothing shops, mobile-phone retailers, and some importers, and said government support was concentrated on larger companies.

Some larger traders bought goods at the official exchange rate but priced them according to the parallel rate, he added.

Thousands of traders lacked companies or mechanisms to import goods, financial and banking expert Mustafa Akram Hantoush noted. Smaller traders needed companies that could supply them at retail or exchange businesses allowed to import orders for traders with verified business locations.

Significant trade with Iran, including food and dairy imports, was also not covered by CBI financing, he added, arguing that bringing smaller traders within the central bank’s framework could help lower the parallel-market rate.