Central Bank of Iraq makes big announcement surrounding currency transactions in 2024
Starting next year, Iraq's central bank will restrict all internal trade to the Iraqi dinar to help control the black-market exchange rate.
The policy was announced during a meeting between Central Bank Governor Ali Al Alaq and representatives of private banks on Sunday.
In a statement, Mr Al Alaq said that the central bank will cease transferring money for foreign trade and entrust it to Iraqi private banks.
The US Federal Reserve Bank's main role is to supervise and monitor, as stated in the statement. The US Federal Reserve is in agreement with the new policy.
Iraq's central bank also plans to allow foreign trade to be settled in currencies other than the dollar, including the euro, Emirati dirham, Turkish lira, and Indian rupee.
In addition to providing protection against risks for all parties involved in the transactions, the new system is accepted internationally and aligned with anti-laundering and terrorism financing laws.
As part of its efforts to achieve monetary stability, the bank introduced the foreign currency auction in 2004.
Black market exchange rates were controlled by the move.
Since the US announced last year that international transfers would be tightened, the dinar's value has dropped.
By using Iraq's foreign currency auction, dollars are being funneled to Iran and Syria, both under American sanctions.
A protester waves an Iraqi flag outside the Central Bank of Iraq in Baghdad against the depreciation of the dinar.
An Iraqi flag is waved during a protest outside the Central Bank of Iraq in Baghdad against the depreciation of the dinar.
In Iraq, the Federal Reserve Bank has imposed strict measures on international transactions, leading to an increase in dollar demand.
A number of Iraqi banks have also been blacklisted for suspected money laundering and suspicious transactions.
A total of 14 private Iraqi banks were barred from transacting in dollars in July.
When Iraq's central bank encountered a liquidity crisis in December 2020, it devalued the local currency to 1,460 dinars to the dollar for banks and 1,470 dinars for individuals.
It changed the official rate this year to 1,300 dinars to the dollar. On the black market, the US currency trades at 1,540 dinars.
Iraq's government has struggled to control the exchange rate this year and contain public anger over soaring prices.
Traders in markets across Baghdad were asked to sign a pledge to sell goods in dinars or face jail.
