The Governor of the Central Bank of Iraq, Ali Al-Alaq, announced today, Friday, the start of supplying the dollar to inside through the accounts of Iraqi banks abroad, and while he pointed to the end of the procedures for opening accounts in the UAE dirhams and understanding with Turkey to make transfers in euros or the Turkish currency, he revealed a broad plan to reform and develop private and government banks.
Meeting with the US Treasury and the Federal Bank
Al-Alak said in an interview with the official agency and followed by / Mawazin News /, that “the Central Bank of Iraq is in continuous communication with the US Treasury Department and with the US Federal Bank,” noting that “this communication continues on a permanent basis, and there are quarterly meetings held to review all matters related to within the framework of this relationship.”
He added that “there is a meeting to be held at the beginning of next month within the quarterly periodic meetings held between the Central Bank, the Federal Reserve and the Ministry of the Treasury, where we review in these meetings all matters with emphasis and focus on the issue of regulating external transfer in order to ensure the safety of the financial system, especially after the application of the new system of external transfer, which requires a lot of coordination.”
He stated that “these developments, which have occurred are radical and not formal developments in the framework of reorganizing trade on correct bases and organizing external transfer on correct bases,” explaining that “details related to this subject require coordination and joint cooperation between the Central Bank and those parties.”
He stressed that “the next meeting will be in the UAE city of Dubai,” pointing out that “there are quarterly meetings in addition to emergency organizational meetings or communications through communication through the phone or through video.”
Agreement to strengthen banks in dollars
He pointed out that “the Federal Bank agrees with the Central Bank to the need to get out of the process of conducting the executive aspects of external transfer and their role is limited to supervision and control, and this is normal in the central banks that do not exercise these executive roles or detailed processes in relation to external transfer, and therefore the plan and agreement between us was the exit of the Central Bank of Iraq and the Federal Bank from these procedural processes, stressing the development of a plan that the process of external transfer will be transformed from the electronic platform that will end at the beginning of next year.”
He pointed to the creation of a new relationship between Iraqi banks and internationally accredited correspondent banks abroad, where the process is confined between them, and the role of the Central Bank of Iraq and the US Federal Reserve is the process of monitoring and supervision, and we began a while ago to try to find a relationship between correspondent banks and our Iraqi banks.
Opening more than 40 bank accounts
“We have been very successful in this context, and we have been able to open more than 40 accounts for Iraqi banks with correspondent banks or abroad,” he said.
Currency diversification
He explained that “to increase flexibility and facilitate the process of external transfer, we have diversified the currencies in which the transfer is made abroad, and we have remittances in addition to the dollar, the euro and the UAE dirham.”
Understandings to make transfers through Turkish banks
He stressed that “the procedures ended the opening of accounts in the dirham, the Chinese yuan and the Indian rupee,” pointing out that “there are preliminary understandings with the Turkish side to make transfers through Turkish banks in the euro or the Turkish currency.”
He pointed out that “this issue is important and is being done in coordination with the Federal Bank and the American Treasury and they are helping us in that,” noting that “this is the opposite of what some understand as an escape from the pressures of the Federal Bank for the dollar, as these currencies are covered in dollars and we buy them from the dollar in the Federal Bank, and it is not far from the Federal Bank, but in the coordination and support of the Federal Bank as it wants to reach with us the desired goal, which is that there is a relationship between Iraqi banks and correspondent banks.”
He stated that “this is happening for the first time by opening this number of accounts for our banks, which is a very important step to strengthen the banking system in Iraq, because the acceptance of these banks means that they have become the systems capable of being internationally accepted,” explaining that “any correspondent bank currently accepts to open an account for an Iraqi bank after confirming that this bank has the necessary systems, standards, conditions and rules under which it operates.”
End of work on the electronic platform
Al-Alaq stressed that “this will lead to the end of work on the electronic platform in 2024,” explaining: “We have reached an advanced ratio and with the completion of other episodes we will leave this method.”
“With this case, the processes will be faster, easier and more disciplined, because these internationally accredited correspondent banks, have the full systems to conduct audits and monitoring before this process is carried out,” he said.
Processing rejected transfers gradually
Al-Alaq pointed out that “this will reduce the percentage of rejected transfers gradually,” pointing out that “rejection of remittances has reasons, but banks and transferees will learn the conditions and points that must be taken into account when submitting the transfer request, as there are formal issues, such as coding and numbering, and there are documents and review required for the end beneficiary is that there are known companies, reasonable prices and others, and over time the importer or the applicant is used to adapting or providing the requirements of the transfer.”
The fact that the US side reduces the amounts of the dollar
He stated that “the Federal Bank and the American Treasury respond to all requests related to the process of providing and strengthening what Iraq needs from the dollar by following the rules and standards of the proper movement of money,” explaining that “this achieves the interest of the two countries and ridding the financial system of any suspicious operations such as money laundering and financing of terrorism, so the money abroad is Iraqi money that has no restrictions, but there are requirements and standards, whether in the dollar currency or even if it is in European currencies or others, these have become one of the required rules in all cases.”
He continued that “some believe that if this money was in another country, it would be without restrictions, but these have become international standards followed even if they are in euros, yuan or pounds, and there will be the same working rules.”
Expanding the diversification of foreign transactions for all Iraqi banks
He pointed out that “our goal is that all banks must have correspondent banks, and we confirmed this issue years ago, as the bank that does not have correspondent banks, it cannot practice its real work and its interruption from the world,” explaining that “some banks were late for this and easy methods were available, so some did not bother to work seriously on this subject, but now all banks realized that there is a necessity, so it began to intervene successively.”
He continued: “Everything that the bank provides is convinced by the correspondent bank that it has the required system to control the movement of funds, provide conditions and follow international standards, and the existence of a control system on the issue of money laundering and terrorist financing will enter this field,” noting that “some banks have begun to use specialized international companies to regulate these aspects until they become qualified.”
Importing miscellaneous currencies goes into effect
He pointed out that “import operations in various currencies have entered into force, for example, with the Chinese side and the euro, they have been started for some time, and the UAE dirham will start next week.”
We aim to reduce demand for the dollar
He stated that “these measures aim to reduce pressure on the demand for the cash dollar, as we want all importers to carry out imports through the fundamental external transfer, but some trade in Iraq does not take this path, but goes to pressure on the dollar cash in the market, so the price imbalance occurs, that is, it is the result of the presence of categories that pressure on cash, while there are the availability of correct fundamental procedures for transfer,” announcing work with the government to overcome the episodes that pressure the cash exchange rate, and we found a set of categories, for example, some deal with the cash dollar inside Iraq. The government issued a decision inadmissibility Dealing in dollars locally, as for the second layer, which are traders who import some materials and do not enter the platform or transfer in the fundamental form, where we started by analyzing these categories such as cigarette trade, which takes the dollar from the market by 100 percent, and we also began to analyze the materials that enter Iraq, such as some mobile phones and other materials. A decision was made that these materials must be proven that they entered Iraq based on an external fundamentalist transfer, if these goods do not carry a formal asset transfer, it means that they are goods that entered illegally.
market follow-up
He pointed out that “there will be follow-up operations in the market, and even in warehouses, to ensure that these materials enter based on an official transfer until we keep them away from the pressure from the dollar cash market and we will expand this to other categories, and any category we find that it is being made in non-fundential transfers or by cash payment will besieging them.”
Iraqis’ transfers in dollars
He pointed out that “the general principle is that approved by the Council of Ministers that trading or payment inside Iraq is in dinars, but there are cases being studied at the present time, and there was a meeting in the Ministry of Planning regarding contracts in their various forms and how to pay, whether in dinars or in dollars, where a set of proposals were put forward now that we are studying,” noting that “some types of contracts or obligations with foreign companies will continue to deal in dollars, and we study other cases to put the best or most appropriate way for them.”
He pointed out that “previously, remittances in the beneficiary did not matter if he was granted in dinars, but now because of the price difference, it is a temporary solution and we are working to solve the problem radically.”
The mechanism of importing the private banks of the dollar
Al-Alaq announced the start of the supply of dollars to the inside from the accounts of Iraqi banks abroad,” explaining that “the supply of the dollar from abroad comes from what is in the accounts of Iraqi banks abroad, for example, we have an account in a bank, we can withdraw it in cash or an instrument, and it is transferred in cash, and there are benefits, including that the amounts come inward instead of abroad.”
He explained that the instructions of the Central Bank will not allow the bank to keep a large amount of foreign currency abroad, as there are certain percentages, in addition to preventing the misconduct of this currency received inside, and we have set rules for its uses.”
He warned that “the central bank is studying the request of the bank that supplies the dollar and its needs before giving approval and confirming the source of the amount and even from the carrier company, in addition to verifying the uses of this amount.”
He pointed out that “because of the price difference, there is pressure on banks to withdraw their balances or remittances from the dollar, which led to the scarcity of some banks of the currency,” explaining that “foreign currency can be available from more than one way, not only through the central bank, and this practice we seek to deepen.”
He explained: “As long as our Iraqi banks have balances abroad in foreign currencies, it is better to enter it, and this supports the reserves in the Central Bank, that is, instead of the bank using its reserves of foreign currency, the currency will be available from bank accounts, and this is an important point.”
A study to restructure banks in Iraq
Al-Alaq stressed that “there is a broad reform plan for private banks with mergers and corrections in some of their situations, and there is a broad plan for government banks that will announce some details, and we are working with Prime Minister Mohammed Shia Al-Sudani in this regard,” pointing out that “government banks are the biggest weight in the banking sector, and we must put them as best as possible.”
