Iraq’s traders face uncertainty as 2025 approaches
Shafaq News/ The Central Bank of Iraq (CBI) has announced the termination of its electronic platform for monitoring and transferring US dollars abroad by the end of 2024. The decision, which aims to streamline financial transactions and align with global banking standards, has sparked a mix of optimism and concern among financial experts, traders, and policymakers.
CBI’s Decision: A Turning Point
Experts have described the decision as a “bold step” with significant economic and regulatory implications. For years, the platform facilitated dollar transfers, monitored financial compliance, and curbed money laundering. However, critics argue that its removal could create challenges, such as reliance on black-market transactions or inflationary pressures if adequate regulatory measures are not implemented.
Kazem Al-Shammari, a member of Iraq's Parliamentary Economic Committee, emphasized the need for oversight. “While the Central Bank traditionally maintains currency reserves and ensures a stable exchange rate, it has also taken on dollar sales due to economic and legal chaos,” Al-Shammari said, highlighting the importance of ensuring that licensed Iraqi banks deliver dollars to legitimate traders and industrialists, especially as some foreign banks have contributed to economic harm.
He revealed that “Parliament plans to invite the CBI Governor for discussions after its legislative recess. Enhanced oversight mechanisms will also be introduced to monitor the currency exchange process, ensuring proper usage and minimizing risks of misuse or sanctions.”
Simplifying Transfers: A New Framework
Uday Al-Alawi, head of the Iraqi Economic Alliance, outlined the previous transfer process, which involved multiple approvals from the CBI, the Federal Reserve, an auditing company, and the transferring bank. He explained that “this system was prone to delays, as a halt by any of these entities disrupted transactions.”
“The new system simplifies these steps by allowing banks to transfer funds directly to intermediary banks, bypassing the Federal Reserve and CBI, though the auditing company remains involved. This change makes the initiating bank accountable to both the CBI and global financial standards,” Al-Alawi continued, adding that only five Iraqi banks currently meet the criteria to operate under the new framework, potentially causing delays as the system scales.
Transparency and Compliance
International economic expert Nawar Al-Saadi described the termination of the platform as an effort to enhance transparency and reduce bureaucracy. “This measure aims to ensure that dollar transfers serve their intended purposes, such as legitimate imports and economic support,” he explained, warning that without clear mechanisms, “the move could lead to higher reliance on the black market and increase inflation, potentially destabilizing Iraq’s financial market.”
Al-Saadi added that “the absence of the platform’s strict oversight could also heighten risks of money laundering and illegal financial activities, which would undermine Iraq’s standing in the global financial system.”
Economic Repercussions
Economic researcher Diaa Al-Muhsin echoed concerns about potential fallout, saying, “Demand for dollars in parallel markets could surge, driving up exchange rates and reducing purchasing power,”
“Higher costs for imports might discourage traders, leading to reduced market supplies, inflation, and unemployment.” He stressed the importance of gradual implementation, increased dollar availability, and support for affected sectors to mitigate these risks.
CBI’s Transition Strategy
The Central Bank clarified that this transition is part of a long-term strategy initiated in 2023 to reorganize financial transfers. By 2024, 95% of transactions had shifted to direct mechanisms between Iraqi and foreign correspondent banks, with only 5% remaining on the electronic platform.
CBI highlighted that trade with major partners like the UAE, Turkiye, India, and China—accounting for 70% of Iraq’s imports—now leverages alternative currencies such as euros, yuan, and dirhams. It reassured that the transition is designed to minimize disruptions, with measures like pre-audit mechanisms and channels for personal transfers in place.
“The official dollar rate will reflect true economic activities, stabilizing prices and controlling inflation,” CBI stated, warning that “rates outside official channels represent practices by those circumventing legitimate pathways.”
