Baghdad Currency Exchange Businesses Protest Against Sanctions, 5 OCT

 Baghdad Currency Exchange Businesses Protest Against Sanctions, 5 OCT

In a recent turn of events, dozens of currency exchange business owners took to the streets in Baghdad to make their voices heard. The protest occurred in front of the Central Bank on Rashid Street and was largely driven by the lifting of sanctions imposed on their businesses due to financial transactions that were deemed to have violated the law. An estimated 80 individuals participated in the protest, demanding that the bank’s management revoke the administrative and financial sanctions that have been placed on their businesses.

Iraq’s Push to Curb Financial Crimes

As of January 1, 2024, Iraq has plans to halt cash withdrawals and transactions in U.S dollars. This decision follows a series of measures intended to curb the misuse of hard currency reserves in financial crimes, and to prevent the evasion of U.S. sanctions on Iran. Mazen Ahmed, director-general of investment and remittances at the Iraqi central bank (CBI), stated that this move is aimed at stamping out the illicit use of approximately 50% of the $10 billion that Iraq imports in cash from the New York Federal Reserve each year.

In addition to this, the initiative is part of a broader effort to de-dollarize an economy that has seen the greenback preferred over local notes by a population weary of recurring wars and crises following the 2003 U.S. invasion. People who deposit dollars into banks before the end of 2023 will continue to be able to withdraw funds in dollars in 2024, but dollars deposited in 2024 could only be withdrawn in local currency at the official rate of 1,320.

Further Measures to Address Misuse

The CBI has already set up a platform to regulate wire transfers that make up the bulk of its dollar demand. This platform was established in conjunction with authorities in the U.S., where Iraq’s $120 billion in reserves from oil sales are held. Ahmed stated that this system was now almost airtight, providing dollars at the official rate to those engaged in legitimate trade such as imports of food and consumer goods. However, cash withdrawals continued to be misused, including by would-be travellers receiving a state quota of $3000 who found ways to game the system.

The Impact on Iraq’s Economy

Many local banks have already been limiting dollar cash withdrawals in recent months, contributing to a shortage that has seen the parallel market exchange rate continue to rise. The CBI expects the dinar to lose more value as the new measures are implemented, but it views this as an acceptable side-effect of formalising the financial system. Amid all these changes, signs have emerged that the CBI’s plans will not be met with open arms. Footage circulated on social media recently showed a depositor at a Baghdad bank threatening to burn it down if he did not receive his deposit in cash dollars, a scene reminiscent of steps depositors have taken amidst Lebanon’s banking crisis.