Economist urges one-year customs cut after dinar devaluation

Shafaq News- Baghdad

Iraq should cut customs duties to a flat 5% for one year to soften the impact of the dinar's devaluation on prices and keep trade and industry from stalling, Manar al-Obaidi, head of the Iraq Future Foundation for Economic Studies and Consultations, said on Thursday.

In a Facebook post addressed to the Cabinet and parliament, al-Obaidi called for an immediate decision to freeze the rates and schedules of the amended Customs Tariff Law No. 22 of 2010 for that period. He proposed temporarily returning to Coalition Provisional Authority Order No. 38 of 2003, which introduced a 5% Reconstruction Levy on most imported goods, with exemptions.

The Finance Ministry and the General Customs Authority should also issue one set of tables and instructions for all border crossings, so costs are applied consistently, he said. Under his proposal, the measure would last 12 months, with a review after six months of its effect on inflation, prices, imports, revenues and industry.

Raising the central bank's purchase rate for dollars from the Finance Ministry from about 1,300 to 1,500 dinars increased the dinar value of each dollar by about 15.4%, giving the state significant extra fiscal room, according to al-Obaidi.

Keeping high customs rates on top of the new exchange rate, he said, places a double burden on imports that passes through to food, medicine, factory inputs, machinery, spare parts and transport costs, and ultimately to consumers. “Do not subject citizens and the market to two shocks at once,” he wrote.

Targeted protection for Iraqi producers could instead come through the Iraqi Products Protection Law, applied when local goods face dumping, foreign subsidies or harmful import surges, he added.

The Cabinet raised the official end-user rate from 1,320 to 1,520 dinars per dollar on Tuesday, and the same decision suspended a new system requiring importers to pay customs duties in advance. Shops and warehouses in Baghdad's Al-Shorja and Jameela wholesale markets, along with several exchange and money-transfer firms, closed after the decision.

Read more: Why Iraq's dinar keeps sliding despite fresh US cash