On Sunday, CBI Governor Al-Alaq announced that Iraq’s domestic debt increased by 2.9 percent in November 2024, reaching 81 trillion Iraqi dinars (amounting to around $61.8 billion). [Getty]
The Central Bank of Iraq (CBI) has denied reports that the United States has imposed sanctions on five Iraqi banks, emphasising that no such measures have been officially implemented. The statement comes amid growing speculation over financial restrictions following recent meetings between Iraqi and US officials in Dubai.
Sources speaking to Al-Araby Al-Jadeed, The New Arab’s Arabic-language sister publication, affirmed that the US Treasury Department requested Iraq halt the operations of particular banks, along with three electronic payment companies, over allegations of illicit financial dealings with Iranian-linked entities.
The sanctions reportedly include a ban on transactions in US dollars, a prohibition of dollar-denominated transfers and financial dealings, and restrictions on engagement with foreign banks.
A senior Iraqi banking official, speaking anonymously to Al-Araby Al-Jadeed, suggested that further financial institutions could face similar restrictions in the near future due to ongoing violations related to dollar smuggling.
CBI’s denial came in response to a Reuters report that Iraq’s central bank will ban five more local banks from engaging in US dollar transactions. This decision is believed to be a result of recent discussions between the US Treasury and Iraqi officials aimed at combating money laundering and curbing financial misconduct.
According to the report, the banks targeted include Al-Mashriq Islamic Bank, United Investment Bank, Al-Sanam Islamic Bank, Misk Islamic Bank, and Ameen Iraq Investment and Islamic Finance Bank.Â
Conflicting reports, negative impact
Jamal Kochar, an Iraqi Kurdish lawmaker and member of Iraq’s parliamentary finance committee told The New Arab, “I cannot confirm whether these banks have indeed been sanctioned, but the committee plans to question CBI Governor Ali Al-Alaq on Tuesday regarding the issue and the outcomes of meetings with US officials in Dubai.”
For his part, Iraqi Kurdish economist Khalid Haider told TNA that if the sanctions were confirmed, they “would cause a slight decline in the price of the Iraqi dinar in exchange for the US dollar”.
However, he noted that currency exchange in Iraq remains stable as “CBI continues to pour large amounts of US dollars into the local markets despite previously promising to halt the daily dollar auction.”
“CBI has only changed the name of the process into foreign trade transfers through international banks organising foreign trade transactions with local Iraqi banks,” he added.Â
Regarding the recent executive order signed by US President Donald Trump, which directs US authorities to prevent Iraq’s financial system from being used to breach sanctions on Iran, the economist noted, “It is very difficult for the Trump administration to fully control Iraq’s trade transactions with Iran, as both countries have large joint borders.”
He also expressed pessimism about Iraq’s economic outlook, citing increasing liquidity issues and rising internal debts. He warned that if the US imposed stricter financial measures on Iraq, they “would negatively affect Iraq’s economy, especially by the second half of this year”.
Kochar recently told TNA that Iraq continues to suffer from cash liquidity challenges. On Sunday, CBI Governor Al-Alaq announced that Iraq’s domestic debt increased by 2.9 percent in November 2024, reaching 81 trillion Iraqi dinars (amounting to around $61.8 billion), compared to 78.77 trillion dinars ($59.5 billion) the previous month.
US Representative Joe Wilson has accused Iraq‘s largest state bank, Al-Rafidain, of engaging in illicit financial transactions benefiting Iran-backed militias in Iraq and Lebanon. In response, Iraq’s Finance Minister, Taif Sami, announced a major restructuring of the country’s public banking sector, including Al-Rafidain and Al-Rashid Banks, in an effort to enhance financial stability and efficiency.
As financial pressures mount, Iraq faces the challenge of maintaining economic stability while navigating growing scrutiny from the US and international financial bodies.
