Statement issued by the Central Bank of Iraq regarding dollar and exchange rate dealing

Following up on recent developments in local markets, especially with regard to trading an informal exchange rate in platforms, daily transactions and its unreal and fabricated fluctuations, forces us to clarify the basic facts related to the trading of foreign currency (US dollar) in local markets, the role of the Central Bank of Iraq in providing foreign currency through its official sources that included all legally permissible transactions, and preventing it from other illegal transactions. And the need for all relevant authorities to cooperate and cooperate in order to achieve the main general objectives, including the stability of the exchange rate in light of sufficient foreign reserves to meet the legitimate needs of citizens, traders and investors of foreign currency.

Therefore, we would like to state the following:

1. The source of the US dollar traded in the local markets is the Central Bank of Iraq, which offers it through banks, exchange and brokerage companies, at the official rate (1320) dinars per dollar. Accordingly, the so-called “parallel market” is not true, as this description is given when the market has its own sources of foreign currency, through private sector exports, domestic tourism, remittances of residents abroad and others. As in other countries, then the role of the Central Bank is to work to balance the exchange rate, so it is a seller or buyer of foreign currency in the market, but in Iraq, the source of the main foreign currency is the Central Bank, and based on that, the exchange market in which the dollar trades is a speculative market in a specific currency of price and purposes, which is illegal trading, and it cannot be legitimized, or exchange rates created by speculators, and the competent authorities should stop the competent authorities should stop the platforms and sites that announce the exchange rates of a fixed-priced currency, the Central Bank of Iraq is obliged to trade them at its scheduled price, as long as it is their only source.
2. In order to achieve the goal of controlling the movement of funds and foreign trade, and in application of the Law on Combating Money Laundering and Financing of Terrorism, and in order to promote the application of international standards, the new system is based on:

• Implementation of all external transfers and documentary credits through the electronic platform, in which all operations are pre-checked in all aspects, and the final beneficiary is verified, which protects the banking sector, non-bank financial institutions and all parties to those operations from the risks they face locally and internationally. The electronic platform allows all legitimate transfers to be made without limits or restrictions, and the Central Bank does not set ceilings for banks licensed to make the transfer, but rather depends on the bank’s ability to attract customers, the validity and accuracy of operations, and the number of its accredited correspondents abroad.
• Implementation of personal transfers abroad, such as study fees, treatment, purchase of personal needs, resident transfers, pensions for overseas residents and others, through international financial transfer companies, such as Western Union and MoneyGram, and citizens are also allowed to use electronic payment cards to be used to purchase goods and services abroad, and all those and other operations are covered by the Central Bank at the official exchange rate.
• Providing cash dollars to travelers at the prescribed official rate, through banks, exchange and brokering companies, and these operations are carried out through an electronic platform to verify the integrity of operations, and the validity of the use of those amounts for citizens traveling. This platform is currently being developed to tighten verification procedures and limit its use to the specified purpose and at the prescribed price.

The said system, with its three dimensions, limits any practices that would expose Iraq, its banking sector and financial institutions to risks, and by providing and opening those channels for legitimate purposes, makes dealing in dollars outside them an illegal practice subject to legal accountability towards the parties involved in its exercise, as no party or person has the right to trade in a dollar originating from the Central Bank, and it sets a price, channels, limits and purposes for its use, and its trading and trading it outside the licensed entities is a prohibited activity under the law, as the Banking Law No. (94) of 2004 stipulates in Article (3) that no person has the right to practice acts of receiving deposits, or other funds payable from the public, Without obtaining a license or permit issued by the Central Bank of Iraq.

1. The application of the foreign remittance system, documentary credits and the cash sale of foreign currency involves achieving economic, control and legal objectives, including the following:

• Strengthen measures to combat money laundering and the financing of terrorism, and prevent the risks of domestic and international sanctions from all relevant parties.
• Introducing Iraq’s imports within channels that achieve the integrity and transparency of operations, and providing important databases and information for planning, organization and control purposes.
• Achieving additional revenues to the state by subjecting all imports to the procedures of comprehensive registration of their details, and the resulting fees.
• Gaining the trust of accredited international banks, which expands the network of relations between the local and foreign banking sector, and increases the number of correspondents of Iraqi banks.
• Shut down illicit foreign transfer outlets, block the proceeds of crime and corruption, and prevent them from finding a way to escape abroad.
• Imported goods do not load the exchange rate difference resulting from paying a higher price when purchased at the unofficial price from the black market, which leads to higher prices and a negative impact on the purchasing power of citizens.

1. The categories that buy dollars from the market and cause an opportunity for speculators and beneficiaries to trade an informal exchange rate are:

• Importers are merchants who do not follow the fundamental methods in external transfers (remittances and documentary credits) through the electronic platform, available to them at the official price, through attempts to collect cash dollars allocated exclusively for the travel of citizens from the market, or by using electronic payment cards intended to pay the purchases and expenses of citizens abroad, or for personal transfers for legitimate purposes.
• Importers of prohibited or narcotic substances such as drug dealers and others, or for substances that do not pass through official border crossings, to escape from the requirements of the law or customs, such as importers of cigarettes and some importers of precision devices, so they go to the market to buy the dollar not allocated to them to pay for their establishments.
• The category that generates returns from the proceeds of crimes, such as bribes, thefts, kidnappings, extortion, sale of contraband and others, and they transfer them abroad to hide them.
• Citizens who pay for their purchases of goods and services inside Iraq in dollars, which pushes them to buy dollars from the market, and since there is no allocation of the central bank sales of dollars for this purpose, their purchase consists of a quota allocated for other purposes, especially travel.

To address the mentioned phenomena, reduce the phenomenon of the illicit market, and a higher-than-scheduled exchange rate, work is underway with the government and the relevant authorities in taking the following measures:

1. Traders and importers use the prescribed channel, through the electronic platform, in order to achieve the objectives of this system and prevent the use of the cash dollar in the market for other than its purposes, and this requires obliging this category to provide proof of the transfer of the amount of their imports originally when their goods enter Iraq at the official border crossings.
2. Motivating and supporting the categories of merchants to enter the electronic platform by simplifying procedures, especially tax ones, determining their ceilings in advance according to categories, and depositing them in the account of the General Authority for Taxes through its accounts in banks.
3. Tightening control of official border crossings and closing informal ports, coordinating between the federal government and the territorial government on regulating and unifying the procedures for the entry of goods and the fees imposed on them, and preventing the entry of prohibited and legally prohibited materials.
4. The competent authorities shall strictly implement the Council of Ministers Resolution No. (23026) of 2023, which includes the inventory of the sale and purchase of goods and services in Iraqi dinars inside Iraq.

We call for the provision of official, popular and media national support in the application of the above, to achieve the aforementioned goals, in a way that preserves the safety and validity of the movement of funds and foreign trade, and to prevent risks to the country, its banking sector and financial institutions, by adhering to the rules of the Anti-Money Laundering and the Financing of Terrorism Law, and relevant international standards and practices.

Management of the Central Bank of Iraq

cbi.iq