Just In : Government To End All Dollar Cash Withdrawals By January 1, 2024 (DETAILS)
Starting from January 1, 2024, Iraq will implement a ban on cash withdrawals and transactions in U.S. dollars.
This measure is part of a broader strategy to combat the misuse of hard currency reserves for financial crimes and to prevent the evasion of U.S. sanctions on Iran. Mazen Ahmed, the Director-General of Investment and Remittances at the Iraqi central bank, revealed that approximately 50% of the $10 billion imported annually from the New York Federal Reserve is being used illicitly.
This initiative also aims to de-dollarize the economy, where the U.S. dollar has been preferred over local currency due to the population’s wariness after the 2003 U.S. invasion and subsequent crises.
Those who deposit dollars into banks by the end of 2023 will still be able to withdraw funds in dollars in 2024. However, any dollars deposited in 2024 can only be withdrawn in the local currency at the official exchange rate of 1,320.
The parallel market rate for the Iraqi dinar stood at 1,560 on Thursday, approximately 15% lower than the official rate. The central bank emphasized that the ban on cash dollar withdrawals will only apply to accounts receiving transfers from abroad.
Iraq has already established a platform to regulate wire transfers, which constitute the majority of its dollar demand. This platform, developed in collaboration with U.S. authorities, has significantly reduced fraudulent transactions that directed dollars to countries like Iran and Syria, both of which are under U.S. sanctions. This system now provides dollars at the official rate to legitimate trade activities, such as importing food and consumer goods.
Despite these efforts, cash withdrawals have continued to be misused, including by individuals provided with a state quota of $3,000 who have found ways to exploit the system. Iraq heavily relies on Washington’s cooperation to ensure that oil revenues and finances are not subjected to U.S. penalties. The current government, which is supported by influential parties and armed factions with ties to Iran, is cautious not to alienate Tehran or anger parties and armed groups deeply involved in Iraq’s informal economy.
Many local banks have already been restricting dollar cash withdrawals in recent months, exacerbating a shortage that has led to a rise in the parallel market exchange rate. While the new measures are expected to lead to a further devaluation of the dinar, it is viewed as an acceptable consequence of formalizing the financial system. The central bank is committed to providing dollars at the official rate for all legitimate purposes.
Amid the frustration with dollar shortages, there have been instances of depositors expressing their grievances. A video circulated on social media showed a depositor at a Baghdad bank threatening to take drastic measures if he did not receive his deposit in cash dollars, mirroring similar actions taken by depositors during Lebanon’s banking crisis.
