DINAR REVALUATION REPORT: Iraq's Integration into the International Financial System: Central Bank's Role in Maintaining a Stable Exchange Rate, 16 SEPT

Iraq's Integration into the International Financial System: Central Bank's Role in Maintaining a Stable Exchange Rate

Iraq's journey towards a stable exchange rate and integration into the international financial system has been marked by significant reforms and challenges. 

 In 2024, Iraq has taken notable steps to stabilize its exchange rate and participate more effectively in global financial markets.

The Dual Exchange Rate: An Unusual Phenomenon. 

Iraq's dual exchange rate system is a result of several factors, including excessive demand for US dollars internationally and internal demand for dollars within Iraq. Countries like Iran and Syria, with devalued local currencies, have driven up demand for US dollars, impacting Iraq's currency system and contributing to the existence of dual exchange rates.

Central Bank's Strategies for Stabilization. 

The Central Bank of Iraq (CBI) has been pivotal in implementing measures to stabilize the exchange rate and integrate Iraq into the international financial system. The CBI's strategies include:

Phasing Out the Dollar Auction

By the end of 2024, the CBI plans to close the currency sale window, marking the end of a two-decade-long operation. This move is part of a broader plan to integrate Iraq into the global economy by shifting to direct commercial banking transactions.

Increasing Regulated Dollar Transactions

Iraq has increased overseas dollar transactions through the official SWIFT system, which helps combat money laundering and ensures compliance with international sanctions. 

New Restrictions on Dollar Use. 

Starting in 2024, the CBI has banned cash withdrawals and transactions in US dollars, focusing on the Iraqi Dinar for internal trade. Foreign trade can be settled in other currencies like the Euro, Emirati Dirham, Turkish Lira, and Indian Rupee.

Conclusion

Iraq's efforts to stabilize its exchange rate and integrate into the international financial system are multifaceted, involving a range of measures from the CBI. By phasing out the dollar auction, increasing regulated dollar transactions, and implementing new restrictions on dollar use, Iraq is moving towards greater financial stability and global participation.