Iraq currency smuggling: Reduced, but not eliminated

• Published date: 12 March 2023

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According to Ahmed Ali, an employee at the Central Bank of Iraq's Banking Control Department, the smuggling of currency abroad has decreased by more than 95%.

In order to address the problem of smuggling, Iraq's government revalued the price of the Iraqi dinar to 1,310 dinars to the dollar from the previous price of 1,460 dinars to the dollar, which enhances the value of the local currency against the dollar. The government mandated that banks, money changers and real estate agents all use these rates.

Iraq's access to its own US dollars

The Iraqi government decision came in response to a US Federal Reserve policy that restricts Iraq's access to its own dollars – housed with all of Baghdad's foreign currency reserves at the US Federal Reserve, which is meant to prevent the flow of money from Iraq into Iran and Russia by limiting the flow of dollars into Iraq. The Federal Reserve also insisted that the Central Bank of Iraq implement measures to prevent smuggling, such as recording dollar transfers on an electronic platform and requiring proof of legitimate travel abroad for those seeking to take out foreign currency.

The Iraqi government's measures have slightly reduced the difference between the official exchange rate and the black-market exchange rate. On the black market, a dollar currently can be purchased for between 1,520 dinars and 1,580 dinars, compared to the 1,750 dinars at which a dollar had previously been valued on the black market.

Mohammad Tawfiq, who owns a currency exchange business, told The Media Line that the rate of currency smuggling has been significantly reduced.

"Before, $20 million to $40 million was smuggled daily, but now the currency smuggled into Iran is less than $100,000 daily," Tawfiq said.

Those seeking to smuggle money have found workarounds to the government's policies, though.

Proof of travel abroad

In response to the new requirement that Iraqis present proof of travel abroad in order to take out foreign money, a black market for passports has cropped up, Tawfiq explained.

"This trade has appeared, where they obtain a person's passport, and give him $300 to $400 in exchange for issuing a ticket reservation in his name, which is usually a forged ticket, in addition to a forged hotel reservation from the reservation sites, and they get the sums that are either smuggled or sell them on the parallel market," Tawfiq said.

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