Foreign remittances: a headache for the Central Bank of Iraq

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[size=52]Foreign remittances: a headache for the Central Bank of Iraq[/size]

[size=45]The Central Bank of Iraq seeks to strengthen its control over the foreign exchange market and tighten control over foreign transfers, as part of its efforts to shift from the current electronic platform to a direct banking relationship system. This shift comes as a crucial step towards achieving greater transparency and efficiency in the Iraqi financial system.[/size]
[size=45]In late August, the Central Bank of Iraq announced the results of a high-level visit to the United States by its governor, Ali Mohsen Al-Alaq, which took place from August 26 to 29, 2024. The visit included a series of intensive meetings in New York, where discussions were held with the US Treasury and the Federal Reserve, as well as meetings with major financial companies such as Visa, MasterCard, MoneyGram, and JP Morgan.[/size]
[size=45]Participants in these meetings praised the progress made by the Central Bank of Iraq in the field of monitoring foreign transfers and dollar sales operations, noting that these improvements were in line with international and local standards.[/size]
[size=45]A meeting is expected to be held between officials of the Central Bank of Iraq and its international partners by the end of this year, to discuss the expected shift to direct banking relations between Iraqi and international banks. This shift will enable the Central Bank of Iraq and the Federal Reserve to exercise their supervisory role away from executive details, which will contribute to the stability and transparency of Iraq’s foreign trade financing operations.[/size]
[size=45]The meetings in New York also addressed mechanisms for expanding the network of international correspondent banks, and qualifying Iraqi banks to open new accounts with these banks, with the aim of enabling them to carry out their financial transactions more effectively, whether through the dollar or other foreign currencies.[/size]
[size=45]In a statement issued on August 30, the Central Bank delegation announced the start of a new phase of foreign transfer operations with the participation of 13 Iraqi banks. This announcement came after reaching an agreement on the mechanisms for regulating international transfers, which will include various currencies such as the euro, the Chinese yuan, the Indian rupee, and the UAE dirham. The scope of work of the international auditing firm E&Y was also determined, which will review these operations to ensure their compliance with international standards, thus enhancing transparency and confidence in the Iraqi financial system.[/size]
[size=45]Remittances and Iraqi Economy Platform:[/size]
[size=45]In a related context, Iraqi economic expert Nabil Jabbar Al-Tamimi spoke, pointing out that the electronic platform for foreign money transfers was an exceptional and necessary measure at the time, but the transition now to the direct banking relations system is an inevitable step. He explained that the Central Bank worked with its international partners to qualify Iraqi banks to open accounts with major correspondent banks, in accordance with international standards.[/size]
[size=45]However, Al-Tamimi warned that abruptly canceling the platform could lead to disruptions in the local market, such as a temporary spike in the dollar exchange rate. Therefore, he suggests either extending the platform for another six months while allowing banks to conduct their transfers in parallel, or immediately allowing direct transfers with correspondent banks until the end of the year, to avoid any economic shocks.[/size]
[size=45]Challenges related to the relationship with Iran:[/size]
[size=45]For his part, Professor of Economics at the University of Basra, Nabil Al-Marsoumi, pointed out that the Central Bank Governor’s visit to Washington resulted in continuing to use the electronic platform for transfers until the end of the year, and then switching to correspondent banks. He explained that the US sanctions imposed on Iran constitute a major obstacle to financing trade with it through official banking channels, which increases reliance on the black market and cash dollars to pay for Iranian imports.[/size]
[size=45]Al-Marsoumi stressed that this situation increases pressure on the dollar in the parallel market, which contributes to widening the gap between the official and parallel prices of the dollar, warning that this shift will not have a significant impact unless the problem of banking cooperation with Iran is resolved.[/size]
[size=45]Confronting financial corruption:[/size]
[size=45]Iraqi economic expert, Dr. Jaafar Al-Hussainawi, stressed that Iraq suffers from an unprecedented spread of financial corruption, considering that the electronic platform was not effective in stopping this phenomenon. Al-Hussainawi pointed out that the Central Bank seeks to end transactions via the electronic platform and replace them with direct banking relations as a healthy step to reduce financial corruption.[/size]
[size=45]Al-Hussainawi concluded by saying that these steps must be serious and strict, far from any political or regional compliments, to achieve the desired goals of protecting Iraq's looted funds.[/size]
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