The Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, announced that starting next year, internal commercial and other transactions in Iraq will be limited to the Iraqi dinar instead of the dollar. According to Al-Sumaria News, the Central Bank is planning to rely on correspondent banks for external transfer operations and discontinue the use of external transfers. This decision was made after an agreement was reached between the Central Bank of Iraq and the US Federal Bank. It’s worth noting that central banks don’t conduct business; instead, their role is focused on supervision and control. The total transfers through correspondent banks have reached 60%, and the implementation rate of verified transfers has exceeded 95%.
During a meeting with the heads of the boards and authorized directors of licensed banks in Iraq, he emphasized that the Central Bank is working to establish direct communication channels between Iraqi banks and their foreign counterparts for correspondence and commercial exchange. This effort is being implemented in several stages, including the opening of transfer channels for various currencies such as the UAE Dirham, Turkish Lira, Indian Rupee, and Euro.
He announced that starting next year, all internal commercial transactions and other transactions will be restricted to the Iraqi dinar, except for those made by travelers.
He noted that the majority of merchants using official transfer channels and offering the dollar at a price of (1,320) dinars directly contributed to controlling the overall price level and reducing the inflation rate. This is a significant indicator of the effectiveness of monetary policy, and he stressed that the black market price should not be used as an indicator as it pertains to the dollar. Cash is only intended for non-fundamental transactions and not legitimate trade purposes.
According to Al-Alaq, the new system for external transfer and sale of the dollar is a safe and internationally accepted method that provides protection for all parties involved. The system is also in compliance with laws against money laundering and terrorism financing. Additionally, it facilitates direct relationships between Iraqi banks and international banks that are accredited. Its implementation has received praise and is considered an important initiative.
During the meeting, the participants discussed the establishment of Riyada Bank and its societal importance, in line with the Prime Minister’s directives and vision. The contributions of banks towards establishing Riyada were also discussed, as well as the working mechanisms of the bank. The bank will serve as a platform for individuals looking to open small productive and commercial projects that can contribute to the growth of the local economy and reduce unemployment rates. The Central Bank will be providing direct support towards this endeavor.
