By John Lee.
Iraq will require that all transactions inside the country are made using the Iraqi dinar from 2024, and not the US dollar.
Statement from the Central Bank of Iraq (CBI):
In a significant development, the Central Bank of Iraq, under the leadership of Mr. Ali Mohsen Al-Alaq, has revealed its plan to cease external transfers in the coming year, opting instead to rely on correspondent banks for international transactions. Currently, 60% of transfers (excluding those on the central bank's electronic platform) are processed through correspondent banks, with an impressive execution rate exceeding 95%.
This decision stems from an agreement reached between Iraq's Central Bank and the US Federal Reserve, aligning with the standard global practice of central banks focusing on oversight rather than executing financial transactions. During a meeting with the leaders and managing directors of accredited banks in Iraq, Mr. Al-Alaq emphasized the Central Bank's commitment to establishing direct communication channels between Iraqi banks and their foreign counterparts for correspondent banking, trade, and other financial operations, including transactions in multiple currencies such as the UAE Dirham, Turkish Lira, Indian Rupee, and Euro.
Furthermore, it was noted that the upcoming year will witness a transition of all domestic and non-travel-related trade transactions to the Iraqi Dinar, with the exception of those intended for travelers. The significant participation of most traders in official transfer channels, acquiring dollars at a rate of 1,320 dinars, has directly contributed to price control and the reduction of inflation. Inflation reduction is a critical indicator of the effectiveness of monetary policy. It is worth noting that the black market exchange rate, being linked to cash dollar transactions for non-legitimate purposes, is not a suitable benchmark for legitimate trade.
Mr. Al-Alaq underscored that the new system for external transfers and dollar sales offers risk protection for all parties involved. It has gained international recognition and aligns with anti-money laundering and counter-terrorism financing regulations, fostering essential direct relationships between Iraqi banks and internationally accredited financial institutions.
During the meeting, discussions also centered on the establishment of a "Leading Bank" and its societal significance, aligning with the directives and vision of the respected Prime Minister. Contributions from banks in the establishment of this institution, designed to serve as a gateway for individuals seeking to initiate small-scale production and commercial projects, are expected to contribute to local economic development and unemployment reduction, with direct support from the Central Bank.
(Source: CBI)
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