The Kurdish Globe
The dollar exchange rate has risen significantly in Iraq and Kurdistan recently, due to scarcity of U.S. dollars on the market.
For the past week, the exchange market in Erbil has been overcrowded--even at lunchtime--as traders all seek USD while prices fluctuate on an hourly basis.
Although the exchange rate at the Central Bank of Iraq (CBI) is still 1179 IQD:1 USD, according to the owner of Kurdistan Money Exchange, Siamand Mawlood, the amount of dollars injected into the market every day is not sufficient for the volume of trade happening in the markets throughout Iraq. "Therefore, the official value of U.S. dollars and the actual market value have 10,000 ID difference [per each US$100]," argued Mawlood.
According to Mawlood, in the past the CBI used to sell 400 to 500 million USD every day, but this number has fallen to only 50 million USD.
"Now the CBI has set new regulations for selling USD, and the buyers should disclose the purpose of buying dollars and should have proof for this; otherwise, they cannot buy from the CBI," Mawloodi explained to the Globe.
Apparently the new procedures by the CBI are aimed at preventing dollars from channeling into the hands of terrorist groups, but Mawlood describes this as an effort to sell it unofficially to some traders at a higher price and make a couple of million dollars a day out of that.
The impact of the exchange rate fluctuations does not stay inside the exchange market, but as Kurdistan is virtually importing everything from abroad, the Kurdish economy has become dollar-dependent.
Hence, as dollar prices fluctuate, the cost of doing business fluctuates proportionately. Cross-border traders have to change their profits into dollars to pay their international suppliers. The volume of this trade, according to Mawlood, reaches 25 million dollars per day only at the Erbil exchange market.
Aiyob Maghdid, a food and cleaning material wholesaler at the Sheikhalla Market in downtown Erbil, has visited the exchange market for many years now. He buys his products from abroad with dollars, and now as the dollar price has increased, he has to pay more dinars to buy the dollar amounts he needs to pay his suppliers.
"Whenever dollar value increases, we will increase our prices as well," admits Maghdid. Although by this he is trying to avoid losses, "the higher our prices become, the emptier my shop will become."
A returning client of Maghdid breaks the silence of his shop, but hearing the new "shocking" prices, he immediately decides to buy less stuff.
Maghdid's client, who is a retailer, says that every item now costs 250 to 500 dinars more than before, and when customers realize that, they think they are being misused and leave the shops while complaining.
Maghdid Mohammed, another retailer at Sheikhalla Market, believes that in addition to dollar prices, there is another factor behind the price increases. "Traders have bought some of their products at a lower price before the exchange rate fluctuations, but some are selling them at today's prices," explains Maghdid.
As buyers continue to complain, store owners like Saman Salim, a clothes seller at the Nishtiman Market, has poured all his clothes on the floor and is trying to change the design of his shop. "I haven't sold anything since yesterday," a bored Salim said. "I have nothing to do here; that is why I want to busy myself with redesigning the store." He believes that Iraqi Prime Minister Nuri al-Maliki is trying to create problems for Kurdistan, but it seems that without a strong domestic production sector, Salim's job and the whole market will stay vulnerable to such shocks.