Iraq Confirms Arrival of Two U.S. Cash Shipments Worth About $1 Billion
Key Facts
Two U.S. cash shipments, each worth about $500 million, have arrived in Iraq, Mahmoud Dagher, an adviser to the central bank governor and its spokesman, said in remarks reported by Rudaw on October 24. The cash arrived as the government seeks to narrow the gap between the official rate and the parallel-market rate, after adjusting the official exchange rate in October. Prime Minister Ali al-Zaidi said the government was working to increase U.S. shipments to as much as $2.5 billion. That stated aim differs from the value of the shipments Dagher confirmed had already arrived. Officials have also discussed potential additional inflows, which does not mean they have arrived or that the two rates have converged.
Al-Zaidi said cash inflows had risen from about $140 million a month after shipments resumed to $500 million, and that the government was working to raise them to $1 billion a month. These figures set a target for increasing monthly inflows, while Dagher said two shipments had already arrived, at about $500 million each. The central bank adviser said another shipment could arrive soon and that additional shipments could total $1 billion, equivalent to two air shipments. Those expected amounts remain separate from the shipments he said had arrived. Dagher did not confirm a specific date or a total shipment value of $3 billion.
Dagher attributed the potential impact of the inflows to the availability of cash dollars and the continued expectation that larger amounts would arrive. He said expectations among companies and individuals that more cash would continue to enter in larger amounts reduce demand for dollars outside banks licensed by the central bank. Cash availability could support the dinar and bring the market rate closer to the official rate, Dagher said, but this was described as a potential effect, not a settled outcome. Cash allocations primarily serve travelers, students studying abroad and grant recipients, as well as other approved purposes. Dagher said cash dollar transactions account for no more than 10% of foreign-currency operations, and that most imports are financed through bank transfers and letters of credit.
The remarks came after the official cash selling rate was adjusted in October from 1,320 to 1,520 dinars per dollar, according to a report published by The New Region. After the adjustment, the parallel-market rate exceeded 170,000 dinars per $100, compared with about 163,000 dinars the previous night, the report said. A press check in Baghdad on the morning of October 29 found $100 selling for 168,500 dinars, about 11% above the official rate of 152,000 dinars per $100. Before the October adjustment, the market rate in Baghdad was about 160,250 dinars per $100, against an official rate of 132,000 dinars, a gap of about 21%. Al-Zaidi said the dollar rate could return in the coming period to 155,000 dinars per $100 or lower, while that remains a forecast attributed to him.
The official-rate adjustment was linked to financial pressure from declining oil revenues, Reuters reported, citing an Iraqi analyst. The analyst said devaluing the dinar gives the government more dinars for each dollar of oil revenue, but raises import costs and reduces household purchasing power. Reuters reported that Iraq’s oil exports fell to about 2.34 million barrels a day in August, from more than 3.6 million barrels a day before the war. In this context, a parliamentary committee called for limiting the exchange rate’s impact on investment project costs, raw-material prices and contractual obligations, as well as on market stability and purchasing power. The government and the U.S. Treasury Department said in a joint statement that they would support Iraq’s efforts to return to exporting 3.4 million barrels of oil a day, including through a pipeline to Turkey.
A new cash shipment arrived in Iraq on September 30, according to The New Region, citing government spokesman Haider al-Obaidi, after understandings between al-Zaidi and U.S. officials. Dagher said the continued arrival of dollar shipments depended in part on a reduction in regional military and security tensions. This condition places the continuation of inflows among factors beyond the government’s monthly targets. The other shipment Dagher said was expected soon, and additional shipments that could be worth up to $1 billion, were not assigned a specific date in the available remarks. Officials provided no confirmed timeline for achieving the goal of raising monthly inflows to $1 billion.