Guys, you may want to know that Iraq has to change its financial habits because US dollars keep seeping into Iran's economy. This is an abosute no-no. Iraq still has over $100 billion US dollars in the Federal Reserve Bank. The goal is to keep Iraq cash-rich and not allow the Iranian Coordination Framework or any country to deplete Iraq's wealth.
As the Iraqi dinar appreciates against the US dollar, the price of essential goods has risen, causing public concern in Iraq. This depreciation has been attributed to the illicit movement of dollars out of Iraq, especially to Iran.
The head of the CBI, Ali Mohsen al-Alaq, announced a significant change in transaction practices within Iraq last month. All internal commercial and other transactions will be conducted exclusively in Iraqi dinars starting in 2024, except those involving travelers. According to the federal budget, the Iraqi Dinar continues to have a lower value against the US dollar.
According to Alaq, the majority of business figures are now converting through official channels, where one dollar equals 1,320 Iraqi dinars.
At the Central Bank of Iraq (CBI), Mazen Ahmed, Director-General of Investment and Remittances, explained that the move to use the Iraqi dinar for domestic transactions is intended to combat the illicit use of about 50% of Iraq's annual cash import from the New York Federal Reserve.
Iraqi federal budgets for 2023, 2024, and 2025 were approved in June at a rate of $1 for 1,300 Iraqi dinars. This proposed value, however, has not been realized due to ongoing smuggling activities, and the dollar is currently valued at 1,570 IQD in Iraq and the Kurdistan Region.
In July, the US banned transactions with 14 Iraqi banks due to alleged violations of its rules, further depreciating the Iraqi currency.
There was a decline in the value of the Iraqi dinar in January, due to factors such as corruption, illicit dollar smuggling, and American pressure.
Dedollarization plan for Iraq
According to a senior official at Iraq's central bank, an accelerated yet phased plan has been announced for dedollarizing its economy by 2024. This move aims to curb the efforts of fraudulent entities and sanctioned individuals seeking to acquire billions of dollars through Iraq's currency auctions.
According to the Central Bank of Iraq (CBI), all domestic transactions and trade will be conducted in the Iraqi dinar starting next year. Foreign trade in Iraq will, however, be permitted to be settled in currencies other than the dollar, including the euro, the Emirati dirham, the Turkish lira, and the Indian rupee. According to a senior CBI official, the new measures would prohibit cash withdrawals and US dollar transactions.
In 2024, individuals who deposit dollars in banks before the end of 2023 will be able to withdraw funds in dollars, Mr. Ahmed clarified. In 2024, however, dollars deposited will only be available for withdrawal at the official exchange rate in the local currency. In its statement, the CBI stressed that the ban on cash dollar withdrawals will only affect dollar transfers from abroad, not Iraqi citizens' dollar accounts.
