A fistful of Dinars: demystifying Iraq’s dollar auction

Ahmed Tabaqchali

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The Central Bank of Iraq’s (CBI) dollar auction has been a continuous source of controversies and conspiracy theories. The main accusations facing it include: the siphoning of dollars to Iran, money laundering, and currency smuggling. Missing from this melee is an understanding of the economy’s key structural imbalances: mainly that the Iraqi economy is wholly dependent on oil export revenues, and demand for goods and services is met through imports handled by a largely informal private sector. Consequently, the government’s oil revenues are the economy’s major source of dollars, and the private sector depends on the auction as a significant source of dollars to pay for these imports. As such, it is the inherent imbalances in the economy’s structure that led to contradictory and unsustainable compromises within the functioning of the auction, and not unsubstantiated conspiracies. This piece aims to demystify the role and the functioning of the auction. It does so through reviewing (1) the oil and dollar lifecycle within Iraqi economy, (2) the private sector’s dollar supply-demand dynamics, and (3) the causes of the currency’s upheavals in November 2022, and their aftermath. It concludes that the measures undertaken in response to the upheavals have helped resolve most of the compromises that bedevilled the dollar auction in the past. However, lasting change requires addressing the economy’s structural imbalances head-on through implementing fundamental economic reforms centred around redefining the oversized role of the government in the economy and society.

JEL-codes: D44 H00 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2024-04-01
New Economics Papers: this item is included in nep-ara, nep-ban and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/122652/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:122652

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().