USD instability hits Iraq; US sanctions impact prompts CBI and finance chief to demand action

Shafaq News/ On Sunday, Parliamentary Finance Committee Head Atwan Al-Atwani and the Central Bank (CBI) Governor highlighted that dollar exchange rate swings are fueling economic instability due to the growing disparity between official and parallel market rates, citing duplicated US sanctions on Iraqi banks.

Al-Atwani, chairing a Committee meeting with CBI Governor Ali Mohsen Al-Alaq, emphasized that "exchange rate stability is crucial for the state,” noting “concerns about duplicated US sanctions on Iraqi and correspondent banks,” urging the CBI “to address the crisis effectively and tighten oversight of private banks to ensure procedural integrity.”

In turn, the Governor detailed the causes of exchange rate fluctuations, explained the electronic platform's role in trade control, and covered the housing initiative, US sanctions on Iraqi banks, and the CBI's foreign currency reserves.

“Our hard currency reserves are adequate to stabilize the market, and the CBI sells over $250 million daily to support foreign trade needs,” Al-Alaq stated, adding, “85% of foreign transfers between Iraqi banks and correspondent banks bypass the US Federal Reserve System."

In addition, he emphasized “the housing initiative's significance,” noting that “the CBI has issued 10 trillion dinars in real estate loans, and is now focusing on financing the construction of 23,000 housing units, prioritizing completed residential complexes.”

In July 2023, the US imposed sanctions on 14 Iraqi banks to restrict dollar transactions, aiming to curb the flow of US currency to Iran. This move has contributed to a surge in the dollar's value against the Iraqi dinar, driven by limited Central Bank policies, inadequate bank integration into the electronic platform, reduced cash injection, and high demand from numerous exchange offices.