What is behind the dollar crisis in Iraq?| MENAFN.COM

Saturday, 28 January 2023 10:51 GMT

What is behind the dollar crisis in Iraq?


(MENAFN- Hip Hop-24) The noise is still the same in the "Al-Kifah" currency market in central Baghdad, where passers-by can easily see huge bundles of money from various international currencies that are exchanged every day in the market, but the volume of money being exchanged has decreased a lot, says Salem Al-Shawk, He is the owner of a banking company.

Al-Shawk says that he used to sell (transfer) more than 250,000 dollars a day into the Iraqi currency and vice versa to his clients, who varied "between business owners, importers, and ordinary people who want to travel outside Iraq or convert their money into dollars to save it."

But the matter changed a month ago, says Al-Shawk to Al-Hurra website, as he transfers an average of 10-20 thousand dollars per day only, "and sometimes less than this," since the price of the dollar began to rise against the Iraqi currency.

And the Iraqi currency lost about 10 percent of its value, says the Wall Street Journal in a report it published a few days ago, after "mysterious" procedures for many, related to the imposition of compliance rules on the Central Bank of Iraq's dealings with currency dealers in relation to the US dollar.

Under the new procedures, Iraqi banks are required to submit dollar transfers on a new online platform with the Central Bank of Iraq, which are then reviewed by the Federal Reserve Bank.

US officials said the system aims to limit the use of the Iraqi banking system to smuggle dollars to Tehran, Damascus and money laundering havens across the Middle East.

Under the old rules, Iraqi account holders were not required to disclose who they were sending money to until after dollars had already been transferred, said Mr. Dagher, the former central bank official.

"We have a robust compliance regime for these accounts that evolves over time in response to new information," a New York Fed spokeswoman said of the accounts it holds for foreign governments, in a statement to the Wall Street Journal.

A US official told the Wall Street Journal that the measures would limit "the ability of malign actors to use the Iraqi banking system."

However, the procedures also limit the access of Iraqi merchants and legitimate companies to the dollar, due to "errors that occur during the application process to the platform," according to the Central Bank of Iraq statement.

The Central Bank of Iraq described the new electronic platform in a statement issued on December 15 as asking for "full details of customers who want money transfers," including the final beneficiaries.

"A number of errors are being discovered and the banks have to redo the process," the statement said, adding, "These measures will take additional time before they are accepted and approved by the international system."

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