Iraq suspends its dealings in Chinese yuan. And the currency basket is an alternative

  The parliamentary finance committee revealed that Iraq decided to stop dealing in the Chinese yuan currency in financial transfers.

“The US Federal Bank forced Iraq to stop dealing in the Chinese yuan currency, arguing that there is manipulation of some remittances or certain problems,” committee member appointed Al-Kazimi said in a press statement.
He said, “a lot of decisions from the central bank have to be imposed by the US Federal Bank,” he said.

Al-Kazmi pointed out that “Iraq’s funds, as we know, are placed in the US Federal Bank as a result of the sale of oil by 3.5 million barrels per day, and these funds enter the US Federal Bank and are not transferred to Iraq in cash, but are transferred to Iraq through transfers issued by the Central Bank. The Federal Bank is notified, and then the Federal Bank is convinced of this transfer and commercial transaction, on the basis of which amounts are issued to the concerned authorities exporting Iraq.”

He pointed out that “many of the measures of the Central Bank are governed by the American will, and this will may be explained for administrative and financial reasons and not financing terrorism and others,” believing that “the reasons are political with the aim of pressuring the Iraqi government,” as he put it.

Regarding the impact of de-exalation in the Chinese currency, Kadhimi pointed out that “the trader and the central bank have multiple options and do not only deal on the dollar, so this suspension is temporary and not permanent.”

As for what the Parliamentary Finance Committee will do in this regard, the member of the committee explained, “We will call on the Central Bank to address the issue and that the basket of currencies be diversified, so that the options are more options for the Central Bank and for Iraqi traders.”
It is noteworthy that Iraq has strengthened its yuan-denominated assets through the Singapore Development Bank to finance Iraqi trade and imports with China by about $12 billion annually.
Iraq also moved to strengthen its assets in UAE dirhams and negotiated to increase its euro-denominated assets to finance trade with the European Union, as well as Iraq began opening bank accounts in Indian rupees for a number of Iraqi banks.
Since the beginning of 2023, the Central Bank of Iraq has issued several decisions that will maintain the stability of the general monetary and economic situation and face the risks of the fluctuation of the exchange rate of the Iraqi dinar against the US dollar, in addition to facilitating import and export operations by opening new horizons with international banks, including China’s banks.
One of the decisions of the Iraqi Central Bank is to strengthen the balances of Iraqi banks, which have accounts with Chinese banks, in Chinese yuan, where dealing in the yuan directly without brokeration of the US dollar contributes to facilitating and accelerating financial transactions, and will reduce import costs and protect against the risk of fluctuating exchange rates inside Iraq.

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