When people heard about the country’s plan to add landmarks and three languages to the new banknotes, their confidence over the (would be) new notes came to rise. However, will this confidence over the country’s currency maintain at a pleasant level if the Central Bank of Iraq will hold some of its US dollar reserves that might affect the current Iraqi dinar trade? How will this affect the current and future trading of their dinar?
Just last August 7, 2012, Iraq placed new restrictions to Iraqi traders of foreign goods from trading of US dollars from the country. It can be noted by the Central Bank Governor, Mudher Saleh, himself, when he said, “That the bank no longer favors cash payments or direct transfers of money to cover deals Iraqi traders strike for the import of foreign goods. The bank is setting new payment terms under which traders are required to do business through guarantees or letters of credit. Iraqi purchase in terms of dollars were mushrooming, the volume of goods entering Iraq was decreasing.”
Was the murky deals (if there’s any) and smuggling of foreign cash that bad that even made the CBI go serious amidst its meticulous preparation for the new Iraqi dinar? We’ll, take it from Mudher Saleh’s words, “Each month more than $4 billion leave the country supposedly in return for the purchase of foreign goods. The situation requires more control and audit of operations involving money transfer. We believe it is better for the country to rely on opening of letters of credit to guarantee. No hard cash leaves Iraq for purposes other than trade.”
In other words, Iraqi dinar traders will then be required to use letters of credit. In this way, Iraqi banks will be able to determine whether the money has legally transacted to pay for goods or not. But, will this restrict the freedom of some traders to participate in the Iraqi free market? At some point we can say in this way but, in terms of security and authenticity, having legal documents such as letters of credit will greatly secure any future transactions. Besides, who would not want to have a secure payment of goods?
In line with this concern, last August 6, 2012, Iraqi banks have agreed to release bank credit cards to avoid employers from carrying huge amount of cash and to effectively facilitate banking transactions. In this way, (at least) fake cash could be minimized in circulation across the Iraqi market. It was Mohsen Ali, an Iraqi banking expert, who stressed out the idea in Baghdad AgencyNews. He said, “The importance of using credit cards to citizens in banking transactions for ease of disposition of funds, calling for universal work in all government and private banks.”
Ali added, “The financial system in Iraq is about to start a financial electronic art called ‘divided the national will.’ This will help to promote credit cards and expands the spread, indicating that the card services credit will make the dealers in the local market, obviating the use of the money supply because it has become a phenomenon tiring and expensive.”
Moreover, the Trade Bank of Iraq just announced the launching of credit cards for people who are dealing with them to eliminate cash in the local Iraqi markets. It seems that for the meantime, the country found an alternative to minimize the flow of elicit cash. However, will this give a positive impact on the current trading situation of the country? For the record, the Central Bank of Iraq has never been so responsive and vocal as it is right now since October 2003 when Saddam’s banknotes were replaced.
Written by DrDinar, this article may be reprinted
online or offline as long as this ad remains and is