Iraq's Finance Committee reveals CBI's steps for currency sale window cancellation
Shafaq News/ On Saturday, Iraq's Parliamentary Finance Committee revealed that the Central Bank of Iraq (CBI) has outlined a pre-cancellation plan for the currency sale window, citing the necessity of preparatory measures before implementing this decision.
According to Hussein Mouanes, a committee member, the CBI's decision to cancel the currency sale window for 2024 has been made, but the exact commencement date for this change has not been specified.
Mouanes clarified to Shafaq News Agency that the cancellation is conditional upon private banks' reliance on international bank correspondence and currency transfer methods.
This move follows the CBI's transfer of its "correspondent" role to several foreign banks, which has raised concerns among some observers due to its ambiguous implications.
Central Bank Governor Ali Mohsen Al-Alaq had previously announced in November 2023 the initiation of dollar supply within Iraq through accounts held by Iraqi banks overseas. However, Mouanes pointed out that this step necessitates an enhancement in the rating of Iraqi banks to enable their interaction with international counterparts, highlighting the current lack of foreign accreditation and correspondence for Iraqi banks.
The currency exchange system, which includes foreign currency auctions, meets the demand for foreign currency and supports various monetary policy objectives. However, criticisms of this system have surfaced due to its substantial daily costs and impact on the central bank's reserves.
Analysts have pointed out that overreliance on fixed exchange rates tied to oil revenues has led to the currency window being perceived as a function of oil rents, hindering economic transformation in Iraq. Despite its drawbacks, the currency sale window has played a role in stabilizing the Iraqi dinar exchange rate and bridging the gap between official and parallel markets.
