Al-Kadhimi's advisor warns of adopting floating exchange rates in Iraq

Shafaq News/ The Prime Minister's advisor for Financial and Economic Affairs, Dr. Mudhir Salih, warned of the detrimental consequences of fluctuating the exchange rate of the Iraqi dinar.

Dr. Salih said in a statement to Shafaq News Agency, "floating is applicable in the economies that the market is the generator of the supply and demand, and the state only interferes with maintaining the equilibrium."

"However, in Iraq, if the government pulls away its hand, the supply no longer exists, and the market collapses," he said.

"The dilemma in Iraq is that the market demands and the state supplies. If the Central Bank [of Iraq-CBI] withholds selling the dollars, the whole supply is halted. There will be no other source of supply. If it existed, it is not sufficient to cover the demand."

A floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange market events. A currency that uses a floating exchange rate is known as a floating currency, in contrast to a fixed currency, the value of which is instead specified in terms of material goods, another currency, or a set of currencies (the idea of the last being to reduce currency fluctuations).