US Federal Reserve's New Strategy Towards Iraq: Addressing the Dollar Value in August 2024
In August 2024, the US Federal Reserve embarked on a new strategy aimed at stabilizing the dollar value in Iraq, a move that comes amidst concerns over the greenback's unprecedented rise. The strategy is multifaceted, focusing on both the regulatory and economic fronts to ensure that the dollar's role in the Iraqi economy remains stable and beneficial.
The Dollar's Impact on Iraq's Economy
The US dollar plays a significant role in Iraq's economy, with the country's foreign currency reserves exceeding $100 billion as of 2024. However, the booming currency black market and the smuggling of dollars to countries and entities facing US sanctions, particularly Iran, have led to increased demand for foreign currencies, threatening to destabilize the dollar's value.
The US Federal Reserve's Response
To address these issues, the US Federal Reserve, in collaboration with the Iraqi Central Bank, has taken several measures. These include the implementation of the international financial messaging system known as SWIFT, which helps in tackling money laundering and ensuring compliance with international sanctions. By regulating dollar transactions through this system, the Fed aims to increase transparency and reduce illicit activities.
Increasing Regulated Dollar Transactions
Since the adoption of SWIFT in 2023, the volume of regulated dollar transactions has significantly increased. Transactions through the Central Bank electronic platform have grown from 200 million per day by August 2024. This increase not only reflects the size of Iraq's economy but also indicates a growing adherence to international regulations among Iraqi banks and traders.
Impact on the Black Market
While the official exchange rate is fixed at 1,320 dinars to the dollar, the black market rate has been much higher, at around 1,470 dinars to the dollar. The new strategy has led to a decrease in rejections of dollar transactions by the US Federal Reserve, as banks and traders have come to better understand international requirements.
Conclusion
The US Federal Reserve's new strategy towards Iraq, implemented in August 2024, has the potential to significantly impact the stabilization of the dollar value in the country. By regulating dollar transactions through SWIFT, the Fed, in tandem with the Iraqi Central Bank, aims to reduce illicit activities and stabilize the dollar's value in the Iraqi market. This approach not only addresses the immediate concerns of a rising dollar but also sets the foundation for a more transparent and regulated financial relationship between the two nations.
SOURCES:
https://www.usip.org/publications/2024/04/baghdad-ready-new-chapter-us-iraq-relations
https://www.newyorkfed.org/press
https://www.voanews.com/a/iraq-central-bank-says-regulated-dollar-transactions-rising-/7542206.html
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