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A report published by the American Wall Street Journal today, Friday, shed light on the dollar crisis in Iraq and the accompanying rise in the prices of food and imported goods.
The newspaper said that "the Iraqis attribute the reason for this to the noticeable change in the policy of the US Treasury and the Federal Reserve Bank in New York during the past weeks."
The newspaper quoted US and Iraqi officials as saying, "The Federal Reserve began last November to impose stricter controls on Iraqi commercial banks' dealings in dollars, in a move aimed at curbing money laundering and illegal access to dollars to Iran and other countries subject to severe sanctions in the Middle East." .
And she indicated that “since 2003, Iraqi banks have operated under less stringent rules, but after nearly two decades, American and Iraqi officials assert that it is time to make the Iraqi banking system more compliant with global controls related to money transfer.”
The newspaper indicated that "since the new procedures entered into force, about 80 percent of daily international money transfers to Iraq, which previously totaled more than $250 million per day, have been blocked," noting that "the reason for this is due to the lack of information." Inadequate about the final destination of the funds or other errors, according to US and Iraqi officials and official government statements.
According to the newspaper, the Chairman of the Board of Directors of the Islamic South Bank and former official of the Central Bank of Iraq, Mahmoud Dagher, says: “For 20 years, we followed the same system … but the shock policy pursued by the Federal Reserve Bank caused a crisis within the Iraqi economy.”
To supply Iraq with dollars, US Air Force planes deliver quantities of dollars to Baghdad every few months, according to the newspaper.
And the newspaper added: “But most of the flows of US currency flow electronically through transactions conducted by Iraqi private banks, which are processed through the official account of Iraq at the Federal Reserve Bank, where the proceeds of oil sales are deposited.”
And she indicated that "US officials say that the strict rules for electronic transfers imposed on Iraqi private banks were not a surprise to officials in Baghdad."
They added that “it was jointly implemented in November after two years of discussions and planning by the Central Bank of Iraq, the US Treasury and the Federal Reserve Board.
US officials indicated that “the rise in the dollar exchange rate was not due to the new measures.”
And the newspaper continued: “Increased scrutiny of transactions in dollars led to a rush of Iraqis towards the parallel local market to buy the American currency, amid a torrent of criticism directed by Iraqi officials, bankers and merchants of the new system, and they said that it caused an unnecessary financial shock and exacerbated their already existing economic problems.”
Iraqi delegation to Washington
The newspaper quoted Iraqi Prime Minister Muhammad Shia al-Sudani as saying that the Fed's action harms the poor and threatens his government's budget for 2023.
"This matter is embarrassing and crucial," Al-Sudani added in an interview. He said he would send a delegation to Washington next month with a proposal to suspend the implementation of the new measures for six months.
The newspaper pointed out that some senior Iraqi officials linked to Iran have directed more severe criticism of the United States, including the leader of the Badr Organization, Hadi al-Amiri, who accused Washington of "using the currency as a weapon to starve people."
And she continued: “Under the new procedures, Iraqi banks must use a new electronic platform linked to the Central Bank of Iraq in order to submit a request to obtain dollars, after which the request is reviewed by the Federal Reserve Bank.”
And US officials stress that “the new system aims to reduce the use of the Iraqi banking system to smuggle dollars to Tehran, Damascus and money laundering havens throughout the Middle East.”
The newspaper quoted a spokeswoman for the Federal Reserve Bank of New York, commenting on the accounts it maintains for foreign governments, including Iraqi accounts, saying: “We have a strong compliance system for these accounts that speaks over time in response to new information.”
A US official said the new measures would limit "the ability of malicious actors to use the Iraqi banking system," according to the newspaper.
The Central Bank of Iraq said in a statement issued on December 15 that the new electronic platform requires providing “full details of customers who want to transfer funds,” including the final beneficiaries.
The statement added, "A number of errors are discovered, forcing banks to re-implement the process.. These procedures will take additional time before they are accepted and passed by the international system."
Four Iraqi banks were prevented from participating in the currency auction supervised by the Central Bank of Iraq, which are “Islamic Asia”, “Al-Sharq Al-Awsat”, “Al-Ansari Islamic” and “Al-Qabid Al-Islami”, according to Iraqi officials and judicial documents.
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