Yahya Al-Ishaq, who heads the Iran-Iraq Joint Chamber of Commerce, has revealed that the Iraqi government and economic activists are working towards resolving the relationship between the dinar and the dollar regarding Iran and other countries. Al-Ishaq has indicated that negotiations between the Central Bank of Iran and its Iraqi counterpart are underway to resolve this matter.
The Iraqi government has recently prohibited using the US dollar in transactions with five countries, including Iran. This implies that Iranian merchants and business people can only purchase the required currency from the Iraqi market, at a higher price than that offered by the official market in their own country.
During an interview, Al-Ishaq discussed the recent developments in trade relations between Iran and Iraq. According to him, these developments are not new for Iran and are merely temporary. He explained that about three months ago, the Iraqi government established unique rules to regulate the relationship between the dinar and the dollar. These rules require all importers of goods into Iraq to obtain their currency from the Central Bank of Iraq at the official rate. Previously, this was done through exchange offices in the country.
He said that due to the restrictions faced by importers of goods from Iran in acquiring the dollar through official channels, they resort to purchasing the dollar from the free market and then exchanging it through exchange offices. This price difference can be as high as 20% and can cause problems for Iranian merchants.
According to Al-Ishaq, the Iraqi government is making efforts to resolve the relationship between the dinar and the dollar in relation to Iran and other countries. He mentioned that there are ongoing negotiations between the Central Bank of Iran and its counterpart in Iraq with respect to this matter.
“He continued, saying that Iraq’s issues with Turkey have recently been resolved, and it is highly likely that the problems with Iran will also be resolved soon. This will ensure smooth commercial flow for Iranian merchants into Iraq without any obstacles. These solutions will help Iraq achieve its desired system while simultaneously consolidating trade flow for Iranians.”
The head of the Joint Iran-Iraq Chamber of Commerce has denied reports about the impact of recent developments on the local currency market in Iran. He explained that the monetary relationship between Iran and Iraq can be divided into two parts. The first part includes financial exchanges for the public sector in Iran and Iraq, such as gas and electricity exports. The second part is the monetary relationship between the private sectors of the two countries.
He concluded by saying that so far, the private sector in Iran and Iraq has not faced a crisis in trade and suffered only a few losses. Currently, the level of export flows to Iraq is almost stable, and during the past eight months, Iran’s exports to Iraq increased by 34% compared to the same period last year, reaching 6 billion dollars. It is expected that this number will rise to 11 billion by March 20, which is the beginning of the Iranian New Year.
A few days ago, a member of the Iranian-Iraqi Chamber of Commerce said that the Iraqi Central Bank’s law to control the dollar and the announced restrictions do not mean the end of trade exchanges between the two countries.
Hamid Hosseini suggested that Iranian business people and merchants should not be overly concerned about the possible outcomes of the recently enacted Central Bank of Iraq law. He reasoned that other nations such as Russia, Syria, Venezuela, and others have also encountered similar issues, but have successfully resolved them.
Experts from Iran believe that the newly passed law by the Iraqi government could have an impact on Iran’s local currency market.
The new law in Iraq prohibits activists in the market from conducting any exchange in foreign currencies.
Due to economic sanctions, all non-oil trade transactions have been carried out in dollars, making other countries an important source of foreign exchange for Iran.
According to analysts, the Central Bank of Iran is required to make an effort to increase the inflow of foreign currency into the country under the aforementioned law. Failure to do so may cause a disturbance in the market balance rate, leading to losses that will have to be covered by market makers themselves.
Earlier this year, the Central Bank of Iraq announced the process for delivering inbound remittances in US dollars.
The Central Bank of Iraq has released a statement regarding the implementation of monetary policies. It aims to facilitate the foreign currency requirements of banks’ customers. The bank has decided which entities it will allow to receive external transfers in cash in US dollars. This new policy will be effective from January 2, 2024. The details of the entities covered by this policy are as follows:
“All diplomatic missions, organizations, and agencies, as well as all international organizations operating in Iraq, are included.”
Non-governmental organizations registered with the General Secretariat of the Council of Ministers must pay incoming foreign transfers in USD if required by the foreign donor.
Contracts for government grants, loans, and foreign agreements are ongoing and in USD currency.
Iraqi exporters receive 40% of the remittances resulting from their exports abroad.
“Banks are allowed to deliver to their customers the amounts of their remittances received from abroad in cash, and from the personal resources available to the bank, and according to the agreement between the bank and the customer,” the statement stated, with the exception of what was previously mentioned. As stated in the statement,
The Central Bank of Iraq has confirmed that banks are still accepting deposits in foreign currencies and that customers have the right to withdraw both deposits and interest in cash.
According to the Central Bank of Iraq, banks are required to obtain approval from customers before automatically converting foreign funds received in US dollars to the Iraqi dinar. This decision is in line with the Council of Ministers’ directive to prevent the use of foreign currency in internal transactions and to encourage the use of the Iraqi dinar, thereby boosting confidence in the country’s currency.
