Iraqis banned from trading in US dollar

Published May 14th, 2023 - 09:34 GMT
Iraqis banned from trading in US dollar
US dollar bills is seen in a pile with Iraqi dinar notes - Source: Shutterstock

Bolstering the Iraqi dinar: Traders, civilians banned from buying, selling in U.S. dollar

ALBWABA – The Iraqi Ministry of Interior issued a ban on Sunday, prohibiting traders and civilians from conducting business in the United States (US) dollar, according to Arabian Business.

Organized Crime Directorate’s Director of Operations Brig. Gen. Hussein al-Tamimi confirmed that a circular was issued by the ministry, prohibiting the use of U.S. dollars in business transactions.

Merchants and citizens are told to use the Iraqi dinar in markets, shops and commercial centers, he added.

Written pledges are being collected from traders across the country, as part of the Central Bank's "Bolstering the Iraqi Dinar" campaign, al-Tamimi explained.

The effort is aimed at limiting exploitation in the U.S. dollar black market, he underlined, and mitigating dollarization in Iraq.

According to the Iraqi official, undercover and civilian police personnel have been deployed in shops and markets around the nation to support the enforcement of the band.

Under the ban, transactions in the U.S. dollar will be limited to the Central Bank of Iraq and exchange shops, the Al Eqtisadiya news website highlighted.

Understanding the Iraqi monetary scene

In November 2022, the United States imposed tighter measures on U.S. dollar exchange outlets in Iraq, in an effort to curb dollar smuggling into and out of neighbouring countries.

Iraqis banned from trading in US dollar
Dollar bills on top of a map of Iran - Source: Shutterstock

These measures entail a 15-day waiting period on dollar purchase requests submitted to the central bank. As well as the issuance of manifests detailing the names and entities involved in every purchase.

Overall, these measures reduced the amount of U.S. dollars purchased from the central bank by market operators. 

This resulted in a shortage in the amount of dollars in supply locally in Iraq, as reported by U.K.-based news and media outlet The New Arab.

Instead of procuring dollars from the central bank, buyers have been buying from illicit operators, who sell at higher prices than the official exchange rate.

As of January this year, the US dollar was being sold at more than IQD200 over the official exchange rate, according to the UK-based media outlet.

Since then, the Iraqi Dinar has fallen against the U.S. dollar, from IQD1,460 to IQD1,600. Whereas the Iraqi government has been unable to break its currency’s decline.

The central bank also banned currency brokerage and set the exchange rate at IQD1,320, but the dollar is still being exchanged at IQD1,445, according to Al Eqtisadiyah on Sunday.

So far, the government is hopeful that backing policy with enforcement and rallying the market behind the central bank’s policy would help rectify the situation.

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