The Central Bank of Iraq said that next year will see internal commercial transactions limited to dinars instead of dollars, except for those delivered to travelers. The bank's governor, Ali Mohsen Al-Alaq, explained that the bank continues to dispense with foreign transfers, as commercial banks rely on correspondent banks for foreign transfers.
During a meeting with the chairmen of boards and authorized directors of licensed banks in Iraq, Iraq indicated that the bank seeks to open direct channels of communication for Iraqi banks, with their foreign counterparts in correspondence and commercial exchange. He added that work is underway to convert in different currencies, including the euro, the UAE dirham, the Turkish lira and the Indian rupee.
He explained that remittances through correspondent banks amounted to 60% of the total transfers (outside the electronic platform of the Central Bank), while the rate of implementation of the realized transfers reached more than 95%, explaining that "this came after an agreement between the Central Bank of Iraq and the US Federal Bank - like the countries of the world - as central banks do not practice executive work, and their role is focused on supervision and control."
Al-Alaq stressed that the entry of most traders to the official transfer channels and the provision of dollars at a price of 1320 dinars was a direct reason for controlling the general level of prices and the low rate of inflation, which is a key indicator of the effectiveness of monetary policy, and that the black market price is not suitable as an indicator as it is related to the cash dollar for non-fundamentalist operations, and is not intended for legitimate trade purposes.
Al-Alaq said that the new system of external transfer and sale of dollars provides protection from risks to all parties to operations, is accepted and praised, is consistent with the Anti-Money Laundering and Terrorism Financing Law, and achieves an important gesture for direct relations between Iraqi banks and accredited international banks.
The statement added that "the meeting reviewed the mechanism for establishing "Riyada Bank" and the societal importance on which it will be based, especially as it is in line with the directives and vision of the Prime Minister, and discussions were presented on this topic, including the contributions of banks in establishing "Riyada" and the mechanisms of work of this bank, which will be a window for those wishing to open small productive and commercial projects, which contribute to the development of the local economy, and reduce the unemployment rate with the direct support of the Central Bank.
A few days ago, a senior US Treasury official said that the Central Bank of Iraq must address the ongoing risks resulting from the misuse of the dollar in Iraqi commercial banks, to avoid imposing new punitive measures targeting the country's financial sector, pointing to fraud, money laundering and Iran's evasion of sanctions.
In July, the United States banned 14 Iraqi banks from conducting dollar transactions as part of a broader crackdown on the illegal use of the dollar.