Baghdad-

Iraq has significantly increased overseas U.S. dollar transactions through its official global SWIFT system in an effort to combat a booming currency black market, the deputy governor of the central bank said on Monday.

Baghdad has imposed a series of restrictions on the use of the U.S. dollar domestically due to its dominance in the country’s economy.

As part of the reforms, the country’s banking industry also adopted an international financial information system called SWIFT in late 2022 to help combat money laundering and ensure compliance with international sanctions.

Oil-rich Iraq does not lack U.S. dollars, with foreign exchange reserves exceeding $100 billion (92 billion euros). But experts say tax evasion, the black market and smuggling of dollars to countries and entities facing U.S. sanctions, mainly neighboring Iran, have increased demand for foreign currencies.

Ammar Khalaf, deputy governor of the central bank, told AFP there had been a significant increase in transactions through the central bank’s electronic platform, which ensures compliance with SWIFT standards.

Many “foreign trade transactions are now conducted through the platform,” he said.

“At the beginning of 2023, the daily transaction volume was $50 million. Now, we have a transaction volume of about $200 million, which is in line with the size of the Iraqi economy,” he added.

Iraqi banks that want to access dollar reserves held in the United States must transfer funds through an electronic system. The Fed will then examine these requests and block them if found to be suspicious.

“We have noticed a decrease in rejections recently as banks understand international requirements” and traders have a clearer idea of ​​what is required to transfer money, Khalaf said.

But the black market remains rampant.

The government sets the official exchange rate at 1,320 dinars to the dollar. On the unofficial market, the dinar has been trading at 1,470 to the US dollar.

Iraq has close commercial ties with Iran, which also wields considerable political influence in Baghdad, with its Iraqi allies dominating parliament and backing the current government.

Prime Minister Mohammad Shia al-Sudani acknowledged last year that sanctions preventing the transfer of dollars to Iranian banks forced Iraqi traders into the black market.

At the end of November, the government announced measures to encourage importers of goods such as cigarettes, cars, gold and mobile phones to obtain U.S. dollars through official channels.

Iraqi authorities banned more than 20 Iraqi banks from conducting U.S. dollar transactions in accordance with U.S. sanctions and anti-money laundering regulations.

“We have been in contact with the U.S. Treasury Department to try to lift the ban,” Khalaf said. He hoped that the negotiations “can produce good and positive results.”

Banned banks are restricted from U.S. dollar transactions but can conduct local transactions.