Iraq to Limit Domestic Transactions to Dinar, Phasing Out Dollar
Iraq’s Central Bank Governor Ali Mohsen Al-Alaq announced on Sunday that starting next year, Iraq will limit all domestic commercial and other transactions to its currency, the dinar, rather than the dollar.
Phase Out of External Transfers Planned
Central Bank Governor Ali Mohsen Al-Alaq said the bank plans to phase out external transfers next year and rely on banks licensed in Iraq to correspondent banks for external transfer transactions, according to a report by the Iraqi News Agency.
Agreement with US Federal Bank
He added: “This followed an agreement between the Central Bank of Iraq and the US Federal Bank, similar to countries around the world where central banks do not have executive functions and their role is focused on supervision and control.”
Reduction in Transfer Volume
Transfers through correspondent banks accounted for 60% of the total volume of transfers (outside the electronic platform of the Central Bank), and the share of sales of verified transfers reached more than 95%.
Efforts to Establish Direct Channels
During a meeting with the heads of boards and authorized directors of banks licensed in Iraq, he confirmed that the Central Bank’s efforts to open direct channels of communication for Iraqi banks with their foreign counterparts in the areas of correspondence, commercial exchanges, etc., have been intense. Currently, funds transfer channels are opened in various currencies, including Emirati dirham and lira, Turkish rupee, Indian rupee and euro.
Restriction on Domestic Transactions
He stressed that in the coming year there will be a restriction on domestic commercial transactions and other transactions using the Iraqi dinar instead of the dollar, except for those delivered to travelers.
Control of General Price Level and Inflation Rate
He pointed out that the entry of the majority of traders into official transfer channels and the provision of the dollar at a price of 1,320 dinars was a direct reason for controlling the general price level and reducing the rate of inflation, which is the main indicator of efficiency. monetary policy.
Black Market Price Not Suitable as an Indicator
He stressed that the black market price is not suitable as an “indicator” because it relates to cash dollars for non-fundamental transactions and is not intended for legitimate trading purposes.
Risk Protection and International Recognition
Al-Alaq noted that the new system of external transfer and sale of dollars provides risk protection for all participants in transactions, enjoys international recognition and praise, complies with anti-money laundering and anti-terrorist financing laws, and implements an important initiative to establish direct relations between Iraqi banks and accredited international banks.
Discussion on the Establishment of Riyadh Bank
He added that the meeting discussed the mechanism for the establishment of Riyadh Bank and the social significance that the bank will have, especially as it is in line with the directives and vision of the Prime Minister.
Addressing Risks to Avoid Punitive Measures
A few days ago, a senior US Treasury official told Reuters that the Iraqi Central Bank must address ongoing risks arising from the misuse of the dollar in Iraqi commercial banks to avoid the introduction of new punitive measures aimed at the country’s financial sector, pointing to fraud, money laundering and Iran’s evasion of sanctions.
US Ban on Iraqi Banks
In July, the United States banned 14 Iraqi banks from trading in dollars as part of a broader campaign against the illegal use of American currency.
Addressing Risks in Iraqi Banks
The official, speaking on condition of anonymity, said there were other Iraqi banks operating with risks that “need to be addressed” despite the campaign.
Source
Source: Agencies