The Central Bank of Iraq (CBI) has decided to stop using the Chinese yuan after the US Federal Reserve accused Iraq of 'inflating transfers.' This move comes amidst an ongoing US dollar vs. Chinese yuan war in the Iraq market. The decision by the CBI to halt the use of the Chinese yuan could potentially raise the US dollar exchange rate and increase inflation, which could have negative consequences for Iraqi families [50e5bece].
Economists have expressed concerns about the decision and its potential impact on the local market. Diyaa Al-Mohsen, an economist, described the move as a 'misstep' that could harm the local market. Ahmed Eid, an economic researcher, argued that the US decision is more political than economic, reflecting the power struggle between the US and China [50e5bece].
Central Bank Governor Ali Al-Alaq is currently on an unannounced visit to the US to discuss the Federal Reserve's accusations and decision. The CBI now faces three options to address the accusations: establishing a system to link bank transfers to goods at border entries, hiring a new company to manage remittances from Iraq to China, or converting dollars instead of Chinese yuan through Iraqi banks owned by foreign investors. These steps are seen as essential to prevent further economic issues [50e5bece].
Despite this development, the CBI continues its efforts to strengthen its forex reserves and maintain stability in the country's financial system. The recent currency auction, where over $275 million in US dollars were sold, demonstrates the bank's proactive measures to manage the supply and demand of foreign currency in Iraq [ddde580c].
In addition to the currency auction, Iraq and Turkey are considering a security agreement to enhance security cooperation. This potential agreement aims to strengthen the bilateral relationship and promote regional stability. Furthermore, Iraq and Jordan have launched an electricity grid interconnection in Al-Anbar's Rutba district, fostering closer cooperation and promoting energy security in the region [81991752].
These recent developments, including the Central Bank of Iraq's decision to stop using the Chinese yuan, the potential security agreement with Turkey, and the electricity grid interconnection with Jordan, all contribute to the evolving economic and diplomatic landscape in Iraq.