The parliamentary finance committee commented on Monday (November 27, 2023), on the possibility of the Iraqi government succeeding in controlling the dollar by the end of the current year.
“The government and the central bank are working to end the dollar crisis once and for all, and there is great progress in this file and there is control over the market, as well as a decline in gradually getting exchange rates in the parallel market,” committee member Moeen Al-Kazimi told Baghdad today.
Al-Kazimi added that “we expect that the new year will witness a significant decline in dollar prices with the appreciation of the value of the Iraqi dinar, especially with the presence of government decisions and directives to address all the causes of the dollar crisis, and we expect that economic and financial stability will be strongly present at the beginning of next year.”
Earlier, a senior official at the Central Bank of Iraq told Reuters that the country will ban cash withdrawals and dollar transactions from Jan. 1, 2024, in the latest effort to curb the misuse of the country’s hard currency reserves in financial crimes and evading U.S. sanctions on Iran.
Mazen Ahmed, general manager of the Investment and Remittance Department at the Central Bank of Iraq, told Reuters the aim of the move is to stop the illegal use of about 50 percent of the $10 billion in cash that Iraq imports annually from the Federal Reserve Bank of New York.
The move is part of a broader campaign to stop the economy’s dependence on the dollar after residents began to favor the US currency over the dinar.
People who deposit dollars in banks before the end of 2023 will be able to withdraw money in dollars in 2024, Ahmed said. But dollars deposited in 2024 can only be withdrawn in local currency at the official rate of 1,320 dinars to the dollar.
the official price
“Want to transfer money? To do it Do you want a dollar card? Here, you can use the card inside Iraq at the official rate, or if you want to withdraw cash, you can at the official price in dinars… But don’t talk to me about the dollar in cash anymore.”
Iraq has already created a platform to regulate bank transfers that make up the bulk of dollar demand, which has served as a hub for counterfeit receipts and fraudulent transactions that have leaked dollars to Iran and Syria, which are subject to U.S. sanctions.
This system, which was put in place in coordination with authorities in the United States where Iraq’s $120 billion reserves of oil sales are held, is now almost tight and provides dollars at the official price for those engaged in legitimate trading activities such as the import of food and consumer goods, Ahmed said.
But he said the misuse of cash withdrawals continues in ways including travelers who are officially entitled to $3,000 but are looking for ways to circumvent the system.
Iraq relies heavily on its good relations with Washington to ensure that the country’s oil revenues and money are not subject to U.S. oversight.
lack of dollar
Many local banks have already limited dollar cash withdrawals over the past few months, exacerbating a shortage that has caused the exchange rate to continue to rise in the parallel market.
Ahmed said that some banks suffer from a dollar shortage because many people try to withdraw at the same time in a feeling of discomfort about the financial system, while some banks are also short of because they provided dollar-denominated loans that were then repaid in dinars.
He added that the CBI also limited the amount of dollars it provides under an agreement with the US central bank to limit cash and shift to electronic payments.
Ahmed pointed out that the Central Bank of Iraq expects the dinar to lose more value with the entry into force of the new measures, but added that this is an acceptable side effect to formalize the financial system, noting that the Central Bank of Iraq provides dollars at the official exchange rate for all legitimate purposes.
The cost to Iraq today is not comparable to the value of achieving this goal, he said.
Ahmed stated that financing operations that are carried out transparently and legally through the bank and at the official rate are the most important and therefore nothing else matters, even if the exchange rate reaches 1700.
He continued, “The cost we are borne now is nothing to achieve this goal with all frankness as long as legitimate channels are established, what matters even if the exchange rate reaches 1700… Because the legitimate purpose is the official price.”