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Iraq currency fall linked to black market dealings

Iraq currency black market Reuters/Ahmed Saad
Tougher US regulations governing Iraq's access to dollars that went into effect last year

Iraq’s currency has fallen against the US dollar because some traders are sourcing hard currency in the black market instead of using the central bank’s official exchange platform, central bank governor Ali Al Allaq told Iraqi state media on Wednesday.

Al Allaq said that some merchants were not using the platform because they were engaged in illegitimate financial activities. The recent increase in the dollar-dinar exchange rate would be temporary as more individuals and businesses got on board, he added.

He also said some sides were spreading rumours over the currency’s decline in order to engage in currency speculation.

The Iraqi dinar was changing hands at around 1,580 per dollar on Wednesday compared to around 1,470 about a week ago.

The official exchange rate is set at 1,300 dinars per US dollar.

In line with tougher US regulations governing Iraq’s access to dollars that went into effect last year, all requests for transfers must now go through an electronic system that contains detailed information on the end-recipient of dollars.

The US measures aim to curb the illegal siphoning of dollars to Iran and apply pressure on Tehran along with US sanctions imposed over its nuclear program and other disputes.

But the system has slowed access to dollars, central bank officials say. Wait times sometimes exceed a month, leading many traders to go to the black market to source their dollars, which in turn drives up the exchange rate.

Al Allaq said that the central bank received transfer requests averaging $155 million per day and could cover the demand, with FX reserves standing at more than $113 billion.