Iraqis have a $100 billion in USD Reserves, but can't get access to dollars when needed
This is the story of an oil worker in Southern Iraq and his efforts to gain access to his salary in dollars:
As the government tries to curb the country's addiction to US dollars, Al-Harith Hassan in Basra has struggled to withdraw his salary in dollars for months.
“When we withdraw our salary, they only give us a fraction, in installments,” said Hassan, an oil field logistics worker paid in dollars.
Iraq has foreign currency reserves of more than $100 billion. However, Baghdad has tightened restrictions on the use of American dollars in order to control the black market.
In semi-tolerated exchange shops, Hassan can exchange his money for rates up to 1,600 dinars per dollar. But says he can only withdraw cash in dinars at the official rate of 1,320 dinars per dollar. The banks and central bank have traded blame for the new restrictions.
Hassan is losing 20 percent of his salary.
There will be more restrictions as the government tries to stop dollars from dominating the economy.
From January 1, Iraq's central bank will require all commercial transactions in dinars. Existing US currency deposits will still be possible in dollars, but new money wired from abroad will only be available in dinars.
According to Hayder al-Shakeri, a researcher at Chatham House think tank, smuggling of US dollars to countries and entities facing US sanctions, such as Iran and Syria, is one of the main factors driving demand for foreign currencies in Iraq.
Several highly taxed goods, such as cigarettes, are also illegally traded, according to Shakeri.
According to Prime Minister Mohamed Shia Al-Sudani, Iraqi traders have turned to the black market due to sanctions preventing dollar transfers to Iranian banks.
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The government announced steps to encourage importers of cigarettes, cars, gold, and mobile phones to obtain dollars through official channels in late November.
In addition, the Hawala over-the-counter money transfer system no longer transfers dollars.
Iraq adopted SWIFT last year in order to monitor dollar usage, combat money laundering, and ensure international sanctions are respected.
According to the prime minister, the new regulations reduced foreign currency trades from $200-300 million to $30-50 million per day.
Mudher Salih, adviser to the prime minister on financial policy, said, "We are consolidating our monetary sovereignty.".
As he told AFP, "We cannot deal with two currencies within the national economy.".
In order to prevent inflation, the government allows importers in food, medicine, and construction to obtain dollars at the official rate.
As a result, banks and importers are favoring alternative currencies such as the euro, the Emirati dirham, and the Chinese yuan, in an effort to reduce the demand for dollars.
The gap between the official and unofficial dollar rates is still causing authorities headaches.
At Baghdad airport, police recently caught several people attempting to travel with dozens of debit cards and withdraw thousands of dollars at the official rate for sale on the parallel Iraqi market for a profit.
