Ivantulafitov: I asked this question in the subject line to grok, and this is what happened. Grok is on x.com if you didn’t know.
How will Iraq Dinar go on forex what is the process? What needs to be done
For the Iraqi dinar (IQD) to become internationally tradable and accepted on the foreign exchange (forex) market, a series of economic, regulatory, and technical steps must be undertaken by Iraq’s government, the Central Bank of Iraq (CBI), and international financial institutions. The process is complex, involving both domestic reforms and coordination with global financial systems. Below is an outline of the key steps involved, based on economic principles, current conditions in Iraq, and insights from available information:
1. Economic Stabilization and Policy Reforms
Stabilize the Economy: Iraq must demonstrate a stable macroeconomic environment, as forex markets favor currencies with predictable value and low volatility. This includes controlling inflation, managing fiscal deficits, and ensuring consistent economic growth, particularly given Iraq’s heavy reliance on oil exports.
Currency Peg or Float Decision: Currently, the IQD is pegged to the U.S. dollar (USD) at a fixed rate set by the CBI, which limits its tradability. To be listed on forex markets, Iraq would likely need to transition to a floating or managed float exchange rate system, allowing market forces to determine the IQD’s value. Lifting the peg requires sufficient foreign exchange reserves and confidence in the dinar’s stability.
Build Foreign Exchange Reserves: The CBI must maintain robust reserves of USD, euros, or other major currencies to support the IQD’s value and intervene in forex markets if needed to stabilize the currency. Iraq’s $120 billion in reserves from oil sales provides a foundation, but these must be managed transparently.
2. Regulatory and Legal Framework
Remove Capital Controls: Iraq currently imposes restrictions on currency exchange and capital flows, particularly for USD transactions, to curb illicit financial activities. For the IQD to be tradable, the CBI must ease these restrictions, allowing free conversion of IQD into other currencies for legitimate transactions, supported by valid documentation.
Compliance with International Standards: The CBI must align with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations set by organizations like the Financial Action Task Force (FATF). This builds trust with global banks and forex brokers, addressing concerns about illicit USD flows to sanctioned countries like Iran.
Bilateral and Multilateral Agreements: Iraq may need to strengthen trade and investment agreements, such as those with the U.S. under the Trade and Investment Framework Agreement (TIFA), to facilitate cross-border currency transactions. Membership in the World Trade Organization (WTO) could also enhance the IQD’s credibility, though no explicit WTO rule mandates revaluation or tradability.
3. Central Bank and Banking System Reforms
Modernize the Banking System: Iraq’s banking sector, dominated by state-owned banks like Rafidain and Rasheed, must adopt international standards for electronic payments, wire transfers, and currency trading. The CBI’s efforts to digitize the financial system and regulate exchange companies are steps in this direction.
Establish Market Infrastructure: The CBI must create mechanisms for banks to engage in spot and forward transactions in IQD, enabling liquidity in forex markets. Currently, banks are restricted from forward transactions for speculative purposes, which limits market development.
Engage International Banks: Major global banks, such as Citi or JP Morgan, could be enlisted to hold IQD reserves or facilitate transactions, as seen in recent deals to strengthen USD reserves for Iraqi banks. This would integrate the IQD into global financial networks.
4. Integration into Forex Markets
ISO 4217 Recognition: The IQD already has an ISO 4217 code, ensuring it is recognized as a standard currency. However, for active trading, forex brokers need assurance of liquidity and demand, which depends on the steps above.
Listing on Forex Platforms: Major forex brokers (e.g., FOREX.com, OANDA) must list IQD pairs (e.g., USD/IQD, EUR/IQD). This requires the CBI to work with brokers to ensure sufficient liquidity and low spreads. Currently, the IQD’s low trading volume and high fees at money exchangers deter brokers.
Market Maker Support: Global banks or market makers must be willing to provide bid-ask quotes for IQD pairs, ensuring continuous trading. This depends on Iraq’s economic credibility and the absence of regulatory risks.
5. Global Acceptance and Confidence
Increase International Trade in IQD: For the IQD to be widely accepted, Iraq must encourage its use in international trade, particularly for non-oil exports. Current efforts to settle trade in euros, Chinese yuan, or Indian rupees indicate a move toward diversification, but the IQD itself must gain traction.
Combat Speculative Scams: The IQD has been subject to scams promising massive revaluation, which damages its reputation. The CBI must clarify the currency’s status and crack down on unlicensed brokers to build investor confidence.
Demonstrate Political Stability: Political instability and security risks in Iraq deter forex traders. Sustained governance improvements and reduced militia influence are critical to signaling a stable environment for currency trading.
6. Technical and Operational Steps
Data Feed Integration: The CBI must provide real-time exchange rate data to financial platforms like Bloomberg or Reuters, enabling traders to monitor IQD rates.
Clearing and Settlement Systems: Iraq must integrate with global clearing systems (e.g., SWIFT) to facilitate IQD transactions. The CBI’s platform for regulating wire transfers is a precursor to this.
Broker and Exchange Outreach: The CBI or Iraqi banks must negotiate with forex exchanges and brokers to include IQD pairs, potentially offering incentives like lower transaction costs initially to boost trading volume.
Challenges and Current Status
Limited Tradability: As of May 2025, the IQD is not widely traded on global forex markets due to its fixed exchange rate, low liquidity, and economic uncertainties. It is primarily exchanged through money changers or select Middle Eastern banks, often with high fees (up to 20–30%).
De-Dollarization Efforts: The CBI’s push to ban USD cash transactions by January 2024 and promote IQD for internal trade aims to strengthen the dinar but complicates international tradability in the short term.
Speculative Claims: Posts on X suggest optimism about the IQD becoming tradable soon, with some claiming it is already on forex platforms or will revalue significantly. These claims lack credible evidence and often stem from speculative or fraudulent narratives.
Timeline and Feasibility
The process could take years, depending on Iraq’s ability to address economic, political, and regulatory challenges. Key milestones include:
Short-term (1–2 years): Easing capital controls, modernizing banking, and increasing IQD use in trade.
Medium-term (3–5 years): Transitioning to a managed float and listing on niche forex platforms.
Long-term (5+ years): Achieving sufficient liquidity for major brokers to offer IQD pairs.
Conclusion
For the Iraqi dinar to be internationally tradable on forex, Iraq must stabilize its economy, reform its banking system, ease currency restrictions, and build global confidence in the IQD. The CBI would need to shift from a fixed peg to a floating exchange rate, integrate with global financial systems, and ensure liquidity through market makers. While progress is being made (e.g., digitization, reserve strengthening), significant hurdles remain, including political instability and low trading volume. Speculative claims about imminent tradability should be approached with skepticism, as the process requires sustained, transparent reforms.
AI: the question is how much of this list is already complete and how much still needs to be completed? If any.
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Tishwash: The President of the Republic to the Governor of the Central Bank: The need to develop a sound future strategy for fiscal policy
President Abdel Latif Jamal Rashid stressed on Wednesday the need to exert efforts and develop a solid future strategy for financial policy.
A statement from his media office, received by Al-Eqtisad News, stated that “the President of the Republic received the Governor of the Central Bank, Ali Al-Alaq, at the Baghdad Palace to discuss the state of the Iraqi banking sector and the measures to develop it, as well as the reform packages being undertaken by the Central Bank to address economic changes and their impact on the local market.”
The President of the Republic stressed “the need to exert efforts and develop a sound future strategy for fiscal policy that will enhance the desired economic development.”
He pointed out that “the meeting discussed plans to stimulate the investment sector by supporting the private sector, especially as the country is witnessing remarkable stability on the security, political, and social levels.”
In turn, Al-Alaq reviewed the Central Bank’s efforts and future plans aimed at strengthening fiscal policy and economic stability in the country link
Tishwash: After failing to hold sessions, Parliament announces the end of its legislative session.
The House of Representatives announced on Tuesday evening, May 6, 2025, the end of its legislative session, following the failure to convene sessions for two months.
The Parliament’s media department said in a statement received by Al-Jabal, a copy of which said, “Based on Article (57) of the Constitution of the Republic of Iraq – and Article (22) of the internal regulations of the Council of Representatives, the Council Presidency decided to end the first legislative session of the fourth legislative year – the fifth electoral cycle, on Friday, May 9, 2025.”
The House of Representatives was scheduled to hold its seventh session of its current legislative term on Monday, May 5, 2025. Another session was also scheduled for Tuesday. However, the House of Representatives failed to convene both sessions, and both times, the session was adjourned due to a lack of quorum.
The Iraqi Parliament failed to hold its regular sessions, having failed to hold its scheduled session on Tuesday, May 6, 2025. Parliamentarians asserted that political leaders were deliberately disrupting the sessions, some of whom disclosed the reasons for this. Calls are mounting for the dismissal of MPs who fail to attend.
Mohsen Al-Mandalawi, First Deputy Speaker of Parliament, announced earlier today that he had “directed the media and parliamentary departments to publish the names of the parliament members who were absent from today’s session and to deduct the prescribed financial percentage from their salaries.”
Meanwhile, the House of Representatives announced the names of the members present at its failed seventh session, held on Tuesday, May 6, 2025, following the renewed failure to hold it. link
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