From Reuters:
“Exclusive: Iraq to end all dollar cash withdrawals by Jan. 1
2024, central-bank official says”
Iraq will ban cash withdrawals and transactions in U.S
dollars as of Jan. 1 2024 in the latest push to curb the misuse of its hard
currency reserves in financial crimes and the evasion of U.S. sanctions on
Iran, a top Iraqi central bank official said. The move aims to stamp out the
illicit use of some 50% of the $10 billion that Iraq imports in cash from the
New York Federal Reserve each year, Mazen Ahmed, director-general of investment
and remittances at the Iraqi central bank (CBI), told Reuters. It's also part
of a broader push to de-dollarize an economy that has seen the greenback
preferred over local notes by a population weary of recurring wars and crises
following the 2003 U.S. invasion.
People who deposit dollars into banks before the end of 2023
will continue to be able to withdraw funds in dollars in 2024, Ahmed said. But
dollars deposited in 2024 could only be withdrawn in local currency at the
official rate of 1,320. The parallel market rate of the Iraqi dinar sat at
1,560 on Thursday, roughly 15% percent below the official rate. "You want
to transfer? Transfer. You want a card in dollars? Here you go, you can use the
card inside Iraq at the official rate, or if you want to withdraw cash, you can
at the official rate in dinars," Ahmed said. "But don't talk to me
about cash dollars anymore." A central bank statement later said the ban
on cash dollar withdrawals would only apply to accounts receiving transfers
from abroad.
Iraq has already set up a platform to regulate wire transfers
that make up the bulk of its dollar demand and that used to be a hotbed of fake
receipts and fraudulent transactions that siphoned dollars to Iran and Syria,
both countries under U.S. sanctions Set up in concert with authorities in the
U.S., where Iraq's$120 billion in reserves from oil sales are held, that system
was now nearly airtight, Ahmed said, providing dollars at the official rate to
those engaged in legitimate trade such as imports of food and consumer goods. But
the cash withdrawals have continued to be misused, he said, including by
would-be travellers provided with a state quota of $3000 who have found ways to
game the system. Iraq is heavily reliant on Washington's goodwill to ensure oil
revenues and finances do not face U.S. censure. At the same time, the current
government, which is backed by powerful parties and armed factions close to
Iran, has been careful not to alienate Tehran, nor anger the parties and armed
groups with deep interests in Iraq's highly informal economy.
DOLLAR SHORTAGE Many local banks have already been limiting dollar cash
withdrawals in the past months, compounding a shortage that has seen the
parallel market exchange rate continue to rise. Ahmed said some banks
were low on dollars because many people were trying to withdraw dollars at once
amid a feeling of unease over the financial system, while some banks also had
shortages because they provided dollar-denominated loans that were then paid
back in dinars. The CBI had also limited the amount of dollars it was
providing as part of an agreement with the Fed to limit cash and shift towards
e-payment, he said. He denied reports of a stoppage in cash shipments to Iraq
from the Fed, noting the latest regular shipment had arrived on Wednesday. Ahmed
said the CBI expected the dinar could lose more value as the new measures went
into force but said it was an acceptable side-effect of formalising the
financial system and the CBI was providing dollars at the official rate for all
legitimate purposes. "The cost we are carrying today is nothing
compared to this goal," he said, describing the parallel market rate as a
rate used mostly for illegitimate transactions. "We don't have a
problem with the (parallel) exchange rate hitting 1,700. If they tell me the
rate is 1,700, I tell them: 'you want to import from Iran. You want to smuggle.
You have corrupt money that you want to get out.'" He added:
"As long as all transparent and legal financing operations happen via us
(at the official rate), the rest does not matter." The central bank
statement later quoted Ahmed as saying that the central bank was taking steps
that would reduce the parallel market exchange rate and there was no indication
that the market rate would hit 1,700.
Some signs of frustration with dollar shortages have already
begun to emerge. On Thursday, video circulated on social media showing a
depositor at a Baghdad bank threatening to burn it down if he did not receive
his deposit in cash dollars, a scene reminiscent of steps depositors have taken
amid Lebanon's banking crisis. "I swear I will burn it down. I swear I
will enter the safe and take my money" the man says.
^ I know many Non-Americans around the World who keep most of
their money in US Dollars because it is very stable and an International
Currency. I don’t see the Iraqis giving up the US Dollar anytime soon – no matter
what the official policy is. ^
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