Bank owners and citizens protest

Protests erupted in front of the Central Bank of Iraq in Baghdad as dozens of people expressed their dissatisfaction over the recent sharp increase in the dollar exchange rate. The surge in the market rate of the dollar from 1,470 dinar per dollar to 1,570 dinar per dollar has been attributed to the United States blacklisting 14 Iraqi banks.

The U.S. Treasury Department and the Federal Reserve Bank of New York imposed the ban on these 14 private Iraqi banks due to suspicions of money laundering and funds being directed to Iran. The ban, first reported by the Wall Street Journal on July 19, has raised concerns among bank owners and protesters alike.

Haidar al Shamaa, owner of a private bank in Baghdad, spoke at a news conference, expressing the negative consequences of almost one-third of private banks being banned from dealing with the U.S. dollar. He called on the Iraqi government to take action and address the situation to minimise the impact on the Iraqi banking sector and facilitate foreign investment.

The 14 banks facing the ban released a joint statement urging the government to intervene and highlighting the potential hindrance to foreign investment and the detrimental effect on the dollar’s price.

Protesters, associated with the Thuwar Tishreen (October Revolutionaries) group, which was part of the 2021 mass protests in Iraq, not only demanded measures to curb inflation but also called on the government to take steps to stabilise the dinar price against the dollar.

Central bank chief Ali al-Allaq assured the public that his institution continues to provide dollars at the official rate of 1,320 dinar to the dollar for all legitimate transactions, including remittances and various imports. He attributed the recent rise in the street price of the dollar to the reluctance of certain merchants, who engage in non-legitimate activities and operations, to use the official electronic platform for currency requests.

Earlier this year, a similar depreciation of the dinar occurred when measures taken by the United States last year severely restricted Iraq’s access to hard currency, aiming to combat money laundering and the flow of dollars to Iran and Syria from Iraq. To stabilise the situation, Iraqi Prime Minister Mohammed Shia al Sudani met with al-Allaq on Sunday to discuss measures to address the dinar’s value against the dollar.