Tech Revolution: 10-18-2023
Iraq has shared an important announcement. Starting on January 1, 2024, Iraq will no longer allow people to take out or make transactions using U.S. dollars.
They're doing this to stop bad people from using the U.S. dollar for illegal activities and to avoid getting in trouble with the United States over sanctions on Iran.
The idea is to prevent about half of the $10 billion that Iraq brings in from the New York Federal Reserve each year in cash from being used in bad ways.
Mazen Ahmed, who works at Iraq's central bank, explained this to. This move is also part of a bigger plan to use the U.S. dollar less in Iraq. People in Iraq have been using the U.S. dollar a lot because they've had many problems like wars and crises since 2003 when the United States invaded their country.
If you put your U.S. dollars in a bank before the end of 2023, you can still take them out in 2024. But if you deposit dollars in 2024, you'll only be able to take out the local currency at a rate set by the government.
The government has one rate for the Iraqi dinar, which is their currency, but on the street, people exchange money at a different rate. Starting in the year 2024, if you happen to possess U.S. dollars in Iraq, there will be some significant changes in how you can use them.
You will have two main options. First, you can use your U.S. dollars with a specially designed card that will allow you to make purchases and transactions inside Iraq at the official government exchange rate.
The second option is to convert your U.S. dollars into the local Iraqi dinar at the rate set by the government.
In simpler terms, if you have U.S. dollars and want to spend money in Iraq, you'll need to convert them into the local currency at the government's exchange rate, and then use the dinar for your transactions.
However, here's an important clarification: These new rules apply primarily to accounts that receive money from other countries. In other words, if you're receiving funds from abroad, these regulations will affect you.
If you're only dealing with money generated within Iraq, you may not be subject to these specific restrictions.
This shift is aimed at controlling the use of foreign currencies, particularly the U.S. dollar, in international transactions within Iraq, ultimately promoting the use of the Iraqi dinar and formalizing the country's financial system.
Iraq has already put a system in place to keep an eye on the money coming in and going out of the country, especially wire transfers, which are like electronic money transfers. This was a big problem before because some people were doing fake transactions and sending money to Iran and Syria, which were under U.S. sanctions.
Iraq has established a new system, with assistance from the United States. This system plays a crucial role in managing Iraq's substantial income from selling oil, a valuable resource for the country.
Over time, this system has become increasingly effective in its operation. One of its key functions is to ensure that U.S. dollars are available at the official exchange rate for individuals and businesses engaged in legitimate international trade.
This means that when Iraqis or businesses want to buy essential items like food and consumer goods from other countries, they can access U.S. dollars at a fair and standard rate.
Imagine you're buying groceries at a store, and you want to use your local currency to purchase imported products. Thanks to this system, Iraqis can easily obtain U.S. dollars, which are widely accepted in international trade, to pay for these goods.
This simplifies the process and ensures that transactions are carried out smoothly, without any unexpected currency complications.
So, this system not only helps Iraq manage its oil revenue but also supports the everyday needs of its people by providing access to U.S. dollars for essential imports, all while maintaining a fair and consistent exchange rate.
But, according to Mr. Ahmed, people were still finding ways to misuse cash withdrawals, especially travelers who were allowed to take out up to $3,000. Iraq wants to make sure it doesn't upset the United States because it relies on U.S. help to manage its money and oil.
At the same time, Iraq's government, which is supported by powerful groups close to Iran, doesn't want to make Iran mad or upset the groups that are deeply involved in Iraq's informal economy.
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