easing of US pressure<\/a> and the lifting of a blockade on Iranian ports.<\/p>\nThat\u2019s a massive blow to Iraq: oil revenues account for more than 90 percent of Iraq\u2019s federal budget.<\/p>\n
The disruption to shipping routes has also affected supply chains, increasing transport times and costs for Iraqi businesses and consumers, in addition to reducing imports.<\/p>\n
One supermarket owner in Baghdad, Alaa-Eddin Sulaibi, estimated that the percentage of imported goods sold at his store was now 70 percent, down from 90 percent before the war started.<\/p>\n
\u201cWe have no choice but to sell local products, even if they are not of the same quality as imported ones,\u201d he said.<\/p>\n
He added that the price of the imported goods had risen by between 25 and 30 percent.<\/p>\n
\u201cThe reasons [for the price increase] extend beyond disruptions in the Gulf, but also longer delivery times for goods arriving from China, and higher fuel and transportation costs, particularly for trade with Turkiye,\u201d he said.<\/p>\n
Several merchants who spoke to Al Jazeera said goods imported from China were now facing significant delays, in some cases taking up to three months to arrive because of the increase in transportation costs as a result of importers being forced to take more circuitous routes to bypass the Strait of Hormuz, or being delayed at the maritime chokepoint.<\/p>\n
Dollar rises against Iraqi dinar<\/p>\n
The crisis has put pressure on the Iraqi dinar, which has dropped against the US dollar, in a development that has triggered concern among Iraqis.<\/p>\n
The dollar rose to about 1,600 Iraqi dinars on the parallel market last week, before easing to about 1,575 this week. Prior to the war, it had been about 1,540 Iraqi dinars to the dollar.<\/p>\n
The widening gap between the official exchange rate \u2013 approximately 1,300 dinars to the dollar \u2013 and the parallel market rate has also created uncertainty for businesses and added to the financial burden on consumers. The official market rate is largely not available to everyday people, and the divergence in rates allows for some businesses to obtain dollars at the cheaper official rate, while others are forced to use the parallel market and pay more.<\/p>\n
At the same time, the Iraqi government is also dealing with concerns about the availability and transfer of dollars that Baghdad receives through arrangements linked to its oil revenues.<\/p>\n
Following the fall of the regime of President Saddam Hussein after the 2003 US invasion of Iraq, the country\u2019s oil revenues were placed in a special account in the US, with money then transferred to Baghdad. This transfer is renewed annually by the US president, with the stated purpose of safeguarding Iraq\u2019s financial resources. But the system also gives Washington a large degree of oversight over the flow of dollars from the account to Iraq.<\/p>\n
In April, the Trump administration began halting the shipment of physical cash from the account to Iraq, releasing only electronic dollar transfers, with some reporting indicating that the halt in physical cash transfers was linked to pressure over the activities of Iran-backed militias in Iraq.<\/p>\n
Some physical cash shipments resumed in July, but the US has also accused several private Iraqi banks of being involved in large-scale dollar smuggling operations to Iran.<\/p>\n
Local reports have suggested that the Central Bank of Iraq (CBI) is facing difficulties supplying commercial banks with sufficient dollars, particularly for financing imports, potentially leading to higher prices in local markets.<\/p>\n
The CBI has denied that it is facing a shortage, saying in a statement on Saturday that it \u201chas sufficient foreign reserves to meet all demands for foreign currency\u201d, adding that included \u201cfinancing foreign trade\u201d.<\/p>\n
The central bank blamed the rise in the parallel market dollar exchange rate on \u201cspeculation, expectations, and the misuse of regional geopolitical conditions by certain parties seeking to disrupt Iraq\u2019s economic and financial stability\u201d.<\/p>\n
\u2018Deep imbalances\u2019 in the economy<\/p>\n
The pressure on Iraq\u2019s finances is nevertheless intensifying as the war continues and oil revenues fall.<\/p>\n
Mudher Mohammed Salih, the Iraqi prime minister\u2019s financial adviser, said in a television interview this week that the CBI\u2019s foreign reserves had fallen from about $106bn before the war began, to roughly $80bn by late August.<\/p>\n
Economists say the crisis has exposed longstanding structural weaknesses in Iraq\u2019s economy, particularly its dependence on oil revenues<\/a> and imported goods.<\/p>\n\u201cThis crisis has revealed the deep imbalances within the structure of the Iraqi economy, most notably the absence of safeguards capable of protecting the economy during times of turmoil,\u201d Ziad al-Hashimi, a PhD researcher in international economics at Anglia Ruskin University, told Al Jazeera.<\/p>\n
\u201cThe crisis has also shown that the Iraqi government lacks genuine solutions or effective measures that could bring about the kind of structural change needed to overcome the situation,\u201d he added.<\/p>\n
Al-Hashimi said that the government\u2019s immediate options were limited.<\/p>\n
\u201cAll the Iraqi government can do are short-term measures that may have only limited the impact in the coming period, such as resorting to borrowing, which is not a genuine solution,\u201d he said. \u201cReal solutions require a long time before results can be seen. They include diversifying Iraq\u2019s oil export markets abroad, managing public spending in a more systematic way to avoid unnecessary expenditures, and continuing efforts to combat corruption.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Iraq is a state heavily dependent on imports, from food and medicines to appliances, as well as raw…\n","protected":false},"author":2,"featured_media":628143,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[114,2681,184,85,6605,46,47,43,6803,162198],"class_list":["post-628142","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-business-and-economy","tag-economy","tag-il","tag-iraq","tag-israel","tag-middle-east","tag-news","tag-news-analysis","tag-us-israel-war-on-iran"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/628142","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=628142"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/628142\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/628143"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=628142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=628142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=628142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}