Baghdad is considering adopting a special mechanism to sell dollars to travelers
BAGHDAD – The Central Bank of Iraq revealed that it will launch a special mechanism for selling dollars to ensure that they reach real travelers only, in the context of filling the loopholes for the leakage of hard currency into the parallel market or its smuggling abroad.
Bank Governor Ali Al-Alaq told the official Iraqi News Agency last Tuesday that the Central Bank and the government “give high priority to the issue of electronic payment because of its important economic repercussions and raising the level of transactions away from excessive use of cash.”
Al-Alaq did not specify the exact date for launching the new mechanism, but he explained that the Iraqi economy is par excellence and the electronic payment process aims to significantly reduce the economic degree of cash.
He stressed that the authorities have made important strides in arranging electronic payment at the level of collection and payment in state institutions, in addition to that the government has approved a package of “important” decisions, which facilitate this process and not burden citizens with the resulting commissions.
At the beginning of 2024, Iraq banned cash withdrawals and transactions in US dollars, in a step to limit the misuse of cash reserves in financial crimes and evade US sanctions on Iran.
Iraqis can withdraw money in dollars before they travel, but this has created a new problem, according to observers.
During the past months, authorities at the country’s airports arrested many travelers in possession of bank cards that they used to withdraw thousands of dollars from abroad at the official rate, then sell them again at the black market price inside Iraq.
The authorities limited dealing in dollars exclusively to the Central Bank and licensed banking offices, coinciding with the intensification of campaigns to monitor the high prices of food and medicine in local markets in Baghdad, in coordination with commercial control departments and intelligence services.
The announcement comes days after a decision preventing eight local commercial banks from dealing in dollars, as part of measures taken to reduce fraud, money laundering, and other illicit uses of the US currency.
The banned banks include Ashur International for Investment and Iraqi Investment, Al-Ittihad Al-Iraqi, Kurdistan International Islamic for Investment and Development, Al-Huda, Al-Janoub Islamic for Investment and Finance, Al-Arabiya Islamic and Hammurabi Commercial.
Under the decision, these banks will be prohibited from participating in the daily dollar auction organized by the Central Bank. The auction is the main source of hard currency in the country that depends on imports.
Last July, the government prevented 14 banks from conducting transactions in dollars as part of a broader campaign aimed at preventing the smuggling of dollars to Iran at that time through the Iraqi banking system. Iraqi and American officials said that the decision came after a request from Washington.
The banned banks include Ashur International for Investment and Iraqi Investment, the Iraqi Union, Kurdistan Islamic International for Investment and Development, Al-Huda, Al-Janoub Islamic for Investment and Finance, Al-Arabiya Islamic, and Hammurabi Commercial.
The central bank says banks banned from dealing in dollars are allowed to continue operating and conducting transactions in other currencies. Iraq has become a focal point in the American campaign aimed at reducing dollar smuggling to Iran.
Iraq, a rare ally of both Washington and Tehran, has reserves of more than $100 billion in the United States and relies heavily on Washington’s goodwill to ensure that its access to oil revenues and financial resources are not hampered.
Al-Alaq says that the Central Bank’s adherence to the rules and principles of external transfer in accordance with the conditions and requirements it set and its insistence on implementing them prompted many hesitant merchants to enter the official platform it created to sell foreign currency.
He stressed that using the platform is easy and safe and allows traders to use the dollar at the official rate, and that the bank has the ability to meet all requests for the dollar, whether personal, commercial, or any kind, as long as they are valid and legitimate, and these are strongly supported by the size of the foreign reserve.
He pointed out that the Central Bank has no problem in offering or selling the dollar, and that it does not place restrictions on sales operations at all and has never specified for any bank the value of its purchases of the American currency, nor has it set an upper or lower limit for any merchant, importer, or user of the dollar, or anything else.
He said, “This gave the impression that there is no problem in responding to demand for the dollar and that speculation is useless because the rules for this speculation are not available and incorrect.” He added, “Some groups are still trying, from here and there, to stay away from the platform for various reasons, whether to evade taxes, customs, etc., or because of illegal trade.”
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