Written by: Dr. Ayoub Mohamed Al-Farsi, member of the Central Bank’s Monetary Policy Committee
The availability of cash US dollars and the ease of obtaining them through official channels is a true indicator of the recovery of the banking sector. During economic crises, foreign currency shifts from being merely a medium of exchange to a store of value and a symbol of stability.
Impact of Receiving Cash Dollars on Restoring Trust
The ability of a depositor to withdraw their savings or allocations in US dollars “in cash,” as well as the ability of traders to transfer payments for goods through official channels, represents the ultimate test of banking credibility.
Breaking the fear barrier: When citizens are reassured that their money is not just “numbers on paper” and can be liquidated at any time, they stop rushing to withdraw deposits. This is further reinforced by the significant progress made by the Central Bank in digital transformation.
Reviving banking circulation: Restored confidence means the return of savings from “homes” to “bank vaults,” even partially, increasing bank liquidity and their ability to finance projects.
Unified spending agreement and government centralization
Fiscal and monetary policy are two sides of the same coin. A unified spending framework eliminates chaos in public expenditure—what if it is accompanied by a unified government?
- Controlling the deficit: Unifying spending channels prevents duplication and waste of resources, reducing pressure on foreign reserves.
- Attractive investment environment: Investors, both local and foreign, require a clear and unified fiscal vision to assess risk—something only achievable by ending financial fragmentation.
Reducing the gap between official and parallel exchange rates
When the official exchange rate approaches the parallel market rate, demand behavior changes:
- Decline in speculation: When the gap is wide, demand for dollars is driven by profit-seeking. When rates converge, demand becomes limited to real needs such as trade, travel, or medical treatment.
- Consumption rationalization: Real demand stabilizes the exchange rate and prevents wasteful depletion of foreign currency.
Role of dollar sales in controlling money supply
Selling US dollars by the Central Bank is a powerful monetary policy tool to absorb excess liquidity:
- Liquidity absorption: When the Central Bank sells dollars, it withdraws local currency from circulation, reducing money supply (M2).
- Inflation control: A reduced money supply lowers excessive purchasing power chasing goods, helping reduce inflation and stabilize prices.
Finally, restoring trust is not merely an administrative decision, but the natural outcome of realistic monetary policies, unified political and financial decision-making, and ensuring foreign currency flows to those who deserve it at a fair exchange rate.
