Since the US invasion of Iraq, the World Bank and the US Treasury have provided funds to its central bank, estimated at $10 billion annually or more.
The money generated from Iraq’s oil sales is deposited into a fund held at the Federal Bank. Iraq attempted to withdraw one billion dollars in cash from the fund, but their request was denied by the bank. The bank claimed that allowing such a withdrawal would contradict their efforts to prevent the outflow of dollars from the country.
Iraq has requested a billion dollars in cash to support its struggling dinar, but the US Treasury is still considering the request. However, there are ongoing discussions within the Federal Bank regarding the lack of a transparent financial system in Iraq, which makes it difficult to rely on it for hard currency. Currently, a significant amount of dollars are flowing to private banks and money exchange shops, which operate under unclear mechanisms and are subject to suspicions of corruption, money laundering, and smuggling outside of Iraq.
The US Federal Bank has informed Iraq that it will not be sending a shipment of dollars, citing Washington’s goal to reduce Iraq’s reliance on the US dollar in favor of electronic transactions that can be easily tracked. US officials have confirmed that smuggling operations out of Iraq are being facilitated by corruption mafias, which is negatively impacting the dollar’s value within Iraq and undermining the efforts of the Central Bank of Iraq to control its movement.
The Central Bank of Iraq is implementing a phased plan to make some adjustments to the country’s financial system. The plan aims to promote the use of dinars in the internal Iraqi market and eliminate the dependence on the dollar by 2024. The bank is taking measures to control the activities of informal companies and individuals who have been buying billions of dollars through currency auctions despite being subject to sanctions.
The government is planning to implement measures to limit the use of the dollar and promote the use of the dinar as the sole currency in circulation. To achieve this, modern mechanisms and technologies will be utilized, and the financial system will be developed to be in line with global standards, ultimately leading to greater monetary stability in the country.
While there may be a political motive behind the American measures, it doesn’t change the fact that Iraq needs to modernize and automate its financial sector. It is crucial for Iraq to prevent the smuggling of its oil imports outside its borders, as this is in the best interest of its people before any other party in the world.