In the newest effort to stop the abuse of its hard currency reserves in financial crimes and the evasion of US sanctions on Iran, the country will ban cash withdrawals and transactions in US dollars by January 1 2024, according to a top official from the Iraqi central bank.
The country says the measure attempts to stop the usage of around 50% of the $10 billion in cash that Iraq imports from the New York Federal Reserve each year.
According to the report, it’s also a part of a larger effort to de-dollarize an economy that has seen the dollar preferred over local currency by a populace tired of recurrent conflicts and crises since the US invasion in 2003.
People who deposit dollars into banks before the end of 2023 will continue to be able to withdraw funds in dollars in 2024, but dollars deposited in 2024 could only be withdrawn in local currency at the official rate of 1,320.
Meanwhile, the parallel market rate of the Iraqi dinar sat at 1,560 on Thursday, roughly 15% percent below the official rate.
Report says 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.
Meanwhile, 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 US sanctions.
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.
