Iraqi banks to stop all US dollar withdrawals as of January 2024
A man counts wads of US dollars on a money counting machine at a currency exchange shop in Baghdad. Photo: Reuters
Baghdad (IraqiNews.com) – In the newest effort to stop the abuse of its hard currency reserves in financial crimes and the violation of US sanctions on Iran, Iraq will restrict cash withdrawals in US dollars as of January 1, 2024, according to a senior official in the Central Bank of Iraq (CBI).
The Director of Investment and Remittances at the CBI, Mazen Ahmed, told Reuters that the initiative intends to stop the usage of around 50 percent of the $10 billion Iraq takes in cash from the New York Federal Reserve each year.
The step also aims to limit the use of foreign currency and boost Iraqi dinar transactions in the Iraqi economy.
Ahmed explained that people depositing US dollars into Iraqi banks before the end of 2023 will still be able to withdraw money in dollars in 2024; however, withdrawals of US dollars made in 2024 may only be made in Iraqi dinars at the official exchange rate, which is 1,320.
The exchange rate of the US dollar in the parallel market in Iraq is 1,560, nearly 15 percent less than the official exchange rate.
The Governor of the CBI, Ali Al-Alaq, mentioned last month that the CBI intends to limit all domestic trade transactions to the local currency starting next year.
Al-Alaq elaborated that this step aims to limit dealing in the US dollar outside the banking sector in Iraq, contributes to reducing smuggling of foreign currency abroad, and supports the Iraqi dinar.
The CBI will stop transferring funds abroad for foreign trade and instead limit its task to supervision and control. Fund transfers will be done through licensed Iraqi banks.
Iraq relies heavily on imports to meet its needs, which increases the demand for the US dollar.
During the past few months, the country has adopted further procedures to rely on the local currency in domestic transactions to support the dinar. These procedures included obliging Iraqi institutions to pay the salaries of foreign workers in dinars.
Additionally, in May, the Iraqi Ministry of Interior obligated merchants to use the dinar instead of the dollar in transactions.
The CBI is the primary source of foreign currencies for various transactions in the country, and the bank provides an electronic platform for importers, traders, citizens, and investors to carry out foreign transfers with the aim of controlling the dinar’s exchange rate against the dollar and eliminating the parallel market.