The Central Bank of Iraq has announced that from next year, all internal commercial and other transactions must be conducted in Iraqi dinars, rather than US dollars.
In a statement received by Al-Sumaria News on Sunday, the Governor of the Central Bank, Ali Mohsen Al-Alaq, announced that the bank plans to discontinue external transfers next year, relying instead on correspondent banks for such operations. Currently, correspondent banks handle 60% of total transfers (outside the electronic platform of the Central Bank), while the implementation rate of verified transfers has exceeded 95%. This move follows an agreement between the Central Bank of Iraq and the US Federal Bank, which is a common practice among central banks worldwide. As part of this agreement, the role of the central bank is focused on supervision and control, without engaging in any business dealings.
During a meeting with the heads of the boards and authorized directors of banks licensed in Iraq, he emphasized the Central Bank’s efforts to establish direct communication channels between Iraqi banks and their foreign counterparts for correspondence and commercial exchange. This has been a gradual process, and the current focus is to open transfer channels in various currencies such as UAE Dirham, Turkish Lira, Indian Rupee, and Euro.
He stated that starting next year, internal commercial transactions and other transactions in Iraq will be restricted to the Iraqi dinar instead of the dollar, except for those given to travelers.
He explained that most merchants using official transfer channels to obtain dollars at a fixed rate of 1,320 dinars played a vital role in controlling general price levels and decreasing inflation rates, which is a crucial indicator of the effectiveness of monetary policy. Moreover, he emphasized that the black market price of dollars is not a suitable indicator as it’s not related to the official exchange rate. Cash is primarily used for non-fundamental transactions and not intended for legitimate trade purposes.
Al-Alaq highlighted that the new system for external transfer and sale of dollars offers risk protection to all parties involved, has gained international recognition and praise, aligns with the laws for combating money laundering and terrorist financing, and marks an important step towards establishing direct relationships between Iraqi banks and accredited international banks.
During the meeting, the mechanism for establishing Riyada Bank was reviewed. The participants discussed the societal importance of the bank and how it is consistent with the Prime Minister’s directives and vision. They talked about the contributions of banks to establish Riyada, as well as the working mechanisms of this bank. It was emphasized that Riyada Bank will provide opportunities for those who wish to open small productive and commercial projects that will contribute to the development of the local economy and reduction of the unemployment rate. The Central Bank will provide direct support for this initiative.
