US sanctions threaten Iraq's dollar supply, warns MP

Shafaq News/ Potential US sanctions on local banks could tighten dollar supply, thereby increasing pressure on Iraq’s currency market amid lingering exchange rate volatility, a member of the Parliamentary Finance Committee warned on Wednesday.

Mustafa Al-Karawi told Shafaq News that restrictions from the US Treasury would reduce the number of banks allowed to participate in Iraq’s foreign currency auctions, fueling demand for dollars and threatening market stability.

“The Central Bank of Iraq (CBI) needs to adopt a genuine and effective system to regulate the market; otherwise, the dollar crisis and exchange rate fluctuations will continue indefinitely,” Al-Karawi noted, criticizing the government’s failure to establish a clear monetary policy capable of stabilizing the dinar’s value.

Concerns over new sanctions arose after reports surfaced this week that the US had blacklisted five Iraqi banks and restricted the use of electronic payment cards abroad. The CBI later denied the measures but acknowledged ongoing talks with Washington.

Over the past year, the US Treasury imposed penalties on several Iraqi lenders over concerns about dollar smuggling and illicit transfers. In response, the CBI barred the affected banks from participating in the currency auctions.