Central Bank of Iraq's Unannounced Visit to the United States in August 2024
The Central Bank of Iraq (CBI) embarked on a discrete visit to the United States in late August 2024, focusing on discussions about the Iraqi banking sector and its evolving dynamics. This trip, led by Governor Ali al-Alaq, aimed to address key issues surrounding the restrictions placed on the use of the US dollar by private Iraqi banks and the implications for future bilateral banking relations.
Purpose of the Delegation's Visit
The CBI delegation's primary objectives included reviewing the current state of Iraq's banking sector and exploring the potential elimination of the existing currency platform at the start of the following year. The discussions envisioned a shift towards a reliance on correspondent banks, a move that could tighten restrictions on private Iraqi banks and affect competition in the sector, potentially tilting the scales in favor of Jordanian banks with established American correspondent relationships.
Addressing US Dollar Restrictions
A significant part of the agenda dealt with the restrictions on the use of the US dollar by several private Iraqi banks. This issue, among others, has been a point of contention, with the delegation seeking to negotiate and understand the implications and requirements for Iraqi banks operating under these constraints.
Consulting for Banking Sector Reform
The Central Bank of Iraq was also in the process of contracting Oliver Wyman, a leading consulting firm, to conduct a comprehensive study aimed at reforming the Iraqi banking sector. The insights from this study were expected to guide future reforms and set a roadmap for the restructuring and improvement of the private banking sector in Iraq.
Lack of Public Announcement
Notably, the Central Bank's visit was not publicly announced, leading to surprise among some economists. The timing of the visit was considered crucial, given the ongoing discussions and developments in the Iraqi banking sector.
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