On Thursday, July 20, 2023, the Central Bank of Iraq released a statement clarifying the restrictions imposed on certain Iraqi banks from conducting transactions in US dollars. This action was taken in response to sanctions levied against 14 Iraqi banks by the US Treasury Department.
According to a statement by the bank, the decision to prohibit Iraqi banks from using dollars was made after reviewing bank transfers from the previous year (2022). This was before the implementation of the electronic platform and before the current government was formed.
He stated that banks, which are unable to conduct transactions in US dollars, have the full liberty to engage in transactions with the Iraqi dinar through multiple services offered by the Iraqi banking system. Moreover, they have the right to conduct international transactions using currencies other than the US dollar.
The statement emphasizes that the electronic platform for external transfers guarantees secure and accurate transactions that comply with international standards, laws against money laundering and terrorist financing. The system has received praise from the US Federal Bank, the US Treasury, and other international financial institutions, who provide high levels of coordination and support. The system is also audited by an accredited international auditor.
He stated that the Central Bank of Iraq has successfully expanded transfer channels and approved correspondent banks, ensuring safe and accessible transfer operations. The number of local banks offering these services can cover all transfer requests, with the Central Bank of Iraq able to facilitate them without any limitations or restrictions, as long as they are legitimate transactions. It is worth noting that the percentage of external transfers made by banks banned from the dollar is only 8% of the total.
According to the statement, the exchange rate in the market relies on the cash dollar provided by the Central Bank of Iraq to fulfill citizens’ requests for travel and other purposes. However, some merchants and individuals withdraw dollars for trade or other reasons outside of official transfer channels, which results in a higher exchange rate on the black market. It’s important to note that this black market is not a parallel market, as the source of the dollar is still the central bank and not from within the market itself.
The statement advocates for the government to establish a system for linking imports and verifying financial transfers that correspond to their value. This is necessary to prevent the use of illegal methods to pay for imports, which puts unjustified pressure on the cash dollar. In addition, it would help in controlling manipulation and smuggling of imports.