CBI bans 8 Iraqi banks from accessing USD

Shafaq News/ The Central Bank of Iraq (CBI) has barred 8 Iraqi private banks from participating in the foreign currency sale and purchase window.

The eight banks are Al-Huda Bank, Investment Bank of Iraq, Kurdistan International Islamic Bank, Union Bank of Iraq, Ashur International Bank for Investment, Al-Janoob Islamic Bank for Investment and Finance, al-Arabiya Islamic Bank, and Hammurabi Commercial Bank.

Last week, the US Treasury labeled the Iraqi Al-Huda Bank as a terrorist financier and a money launderer. It proposed to cut off the bank from the US financial system and sanctioned its owner. It accused the bank and its foreign backers, including Iran and its allies, of funding violence and undermining Iraq's economy and stability.

After the US decision, the CBI clarified in a statement that Al-Huda bank "did not participate in foreign currency buying and selling during 2023," stressing that the bank continues to provide its services but refrains from dealing in the US dollar.

Earlier, the Iraqi Parliament urged the government and the Central Bank of Iraq to diversify the commission basket and the foreign currency reserves, rejecting the dollar's dominance.

The proposal sparked a debate, as some experts warned of the economic and political risks of challenging the petrodollar system, while others defended Iraq's right to choose its currency.

Bassem Al-Gharibawi, a Parliamentary Oil and Gas Committee member, acknowledged Iraq's right to sell its oil in any currency but recognized the need to liberate itself from existing restrictions, which may necessitate US approval.

In this regard, economic researcher Omar Al-Halbousi expressed concern over the potential economic consequences, describing the Finance Committee's proposal as a potential "suicide" for Iraq's economy.

Notably, in late 2023, the CBI announced that all transactions inside Iraq would be made using Iraqi dinars starting in 2024.

Despite the federal government's attempts to stabilize the situation, the Iraqi dinar keeps falling against the US dollar. As a result, many Iraqi banks have started preventing customers from withdrawing their money in dollars and only allowing them to withdraw in Iraqi dinars at the value set in the budget.