CBI sells +$274 million in forex on Sunday

The National Bank of Iraq (CBI) sold more than $274 million on Sunday, with settlements offsetting cash deals overwhelmingly.

The Bank sold $274,868,286 during today’s auction, according to a CBI report. Documentary credits, international settlements of electronic cards, and foreign transfers were covered at a base exchange rate of 1,310 dinars per dollar, while cash transactions were covered at a rate of 1,305 dinars per dollar.

The report point by point that a large portion of the deals ($267,368,286) went to take care of unfamiliar equilibriums as moves and credit exchanges. Cash deals received the remaining $7,500,000.

Two banks conducted cash transactions, and 17 banks fulfilled requests related to external balances. Only five exchange and brokerage firms participated in the auction.

197 businesses were barred from participating in foreign currency auctions by Iraq’s central bank in May. This was seen as a move to stop money laundering and financing of terrorism.

Baghdad has imposed a number of restrictions on the domestic use of American dollars due to the dollar’s dominance over the economy.

The Central Bank vice governor stated last week that Iraq has significantly increased overseas dollar transactions through the official global SWIFT system earlier this month.

As part of the reforms, the country’s banking sector will also adopt the international financial messaging system SWIFT by the end of 2022 to combat money laundering and guarantee compliance with international sanctions.

Oil-rich Iraq has no lack of dollars, with unfamiliar money stores of more than $100 billion. However, experts claim that demand for foreign currencies has increased as a result of tax evasion, the black market, and dollar smuggling to nations and entities subject to sanctions from the United States, primarily Iran.

The daily transaction volume was $50 million at the beginning of 2023. Iraq presently has around $200 million, which is steady with the size of Iraq’s economy, as per official appraisals.

Iraqi banks needing to get to dollar holds held in the US should make moves through the electronic framework. The requests will then be examined by the US Federal Reserve, which will block them if it deems them suspicious.

However, the black market continues to thrive.

The government sets the official exchange rate at 1,320 dinars for every dollar. On informal business sectors, the dinar has been exchanging at 1,470 for every dollar.

Iran has strong commercial ties to Iraq. It also has a lot of political power in Baghdad, where its allies in Iraq control parliament and support the current government.

Last year, Prime Minister Mohamed Shia al-Sudani acknowledged that Iraqi traders had turned to the black market as a result of sanctions preventing dollar transfers to Iranian banks.

At the end of November, the government made plans to encourage people who import things like phones, gold, cars, cigarettes, and cars to use official channels to get dollars.

In accordance with US sanctions and money laundering regulations, Iraqi authorities have restricted the conduct of dollar transactions by more than 20 Iraqi banks.

The prohibited banks are confined from managing in dollars, however they are permitted to work neighborhood exchanges.