Baghdad:Advisor to the Governor of the Central Bank of Iraq (CBI) and spokesperson for the Bank, Mahmoud Dagher, confirmed on Saturday that an increase in cash dollar flow to Iraq will help stabilize the market and strengthen the value of the Iraqi dinar.

According to Iraqi News Agency, Dagher stated in an interview with Al-Iraqiya News TV that each shipment amounts to approximately half a billion dollars, with further shipments expected that could total up to one billion dollars. He noted that Iraq primarily finances its imports through bank transfers and letters of credit, which are sent directly to exporters, bypassing the cash market. Cash-based transactions account for no more than 10% of the total and are allocated to meet the needs of travelers, scholarship recipients, students, and other specific purposes.

The Prime Minister’s call for an increase in cash dollar shipments stems from his experience and understanding of the Iraqi market, which is highly sensitive to the supply of physical dollars. Increasing the volume of cash dollars in the market helps strengthen the Iraqi currency, bringing it closer to its true value, around 152,000 dinars per 100 dollars.

Dagher explained that the sensitivity is linked to the nature of commercial transactions with certain countries, as well as the importance of having cash dollars available to reassure market participants and those holding foreign currency. The arrival of these new shipments is expected to contribute to market stability.

He further noted that increasing the supply of physical US dollars, through various methods employed by CBI, fosters a sense of confidence in the market. Prices are not determined solely by actual supply but are also significantly influenced by future expectations. When companies and individuals anticipate a continued, larger inflow of physical dollars, informal demand for the currency, outside of banks licensed by CBI, decreases, which in turn has a positive impact on exchange rate stability.

Dagher elaborated that a single shipment arriving in Iraq by air is worth approximately half a billion dollars, with two such shipments already arrived. Previously, the transport of physical dollars faced challenges due to security instability and military operations in the region. Efforts by the Prime Minister and CBI were instrumental in convincing the US Federal Reserve of the importance of ensuring a smooth flow of physical dollar shipments to Iraq, which helps reassure the local market.

He also confirmed that another shipment is expected to arrive in Iraq soon, with the potential for further shipments, bringing the total value to as much as one billion dollars, equivalent to two planeloads, to meet market demand. The continuation of this process is contingent upon the stabilization of the security and military situation in the region.

Regarding the arrangements for the supply of physical US dollars, Dagher explained that at the beginning of each year, CBI agrees with the US Federal Reserve on its annual requirements for physical dollars, for instance, between 10 and 12 billion dollars. These are delivered in one or two shipments periodically, with the necessary security measures in place for their transport.

Dagher highlighted that increasing shipments of physical dollars at this stage is a prudent step toward strengthening market stability. Continued inflows will help reassure market participants and positively influence their expectations, a key factor in determining the exchange rate.