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Iraq's Central Bank tightens restrictions over corruption concerns

High demand for US dollars has Iraqi bankers apprehensive.

Iraq credit cardsEnlarge
An Iraqi employee of Warka Bank for Investment and Finance shows how to use a credit/debit card that is issued by the bank on March 11, 2008 in Baghdad, Iraq. Warka Bank for Investment and Finance and other Iraqi banks have started issuing credit/debit cards in Baghdad, installing teller machines in selected places in the capital in a move to encourage Iraqis to accept the cards and surmount their repugnance to anything but cash. (Wathiq Khuzaie/Getty Images)

The Central Bank of Iraq today moved to tighten restrictions over fears that its US dollars were leaking into the black market in Iran and Syria, both of which have been crippled by recent economic sanctions, reported the Financial Times

Banking officials say demand for the US dollar has skyrocketed to some $400 million a day, the Financial Times reported, noting that's "more than double what one private sector banker estimates as the legitimate need."

The National said because the dollar's value has shot up in neighboring Syria and Iran, both of which are reeling from economic sanctions, officials suspect an increase in criminal activity.

Today one US dollar is around 95 Syrian pounds on the black market, The National said, up from 48 pounds a year ago, while 16,000 Iranian rials now are equal to one dollar, compared to 12,5000 in Decemeber. 

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The Central Bank's deputy governor, Mudher Salih Kasim, told the Financial Times that because “Iraq is liberal and the two countries next door are under sanctions," the "consequences are very bad: this is spillover.”

Starting in June, Iraqi importer-exporters will have to submit a license documenting that the money they take from Iraq's central bank will only be used to import goods into the country, according to The National. They will also be required to show a tax clearance certificates, previously only required for extremely expensive transactions. Kasim claimed the new rule is part of a broader effort on the part of the authorities “to see the real people who access the dollars," said The Financial Times.

The new rules also serve the interests of the bank itself because it needs to keep daily dollar sales at or below $200 million in order to maintain foreign currency reserves. 

Also today, Iraq's deputy prime minister for energy accused Iraq's Kurdistan of smuggling oil in a growing dispute over resources, The Wall Street Journal reported. The country's semi-autonomous Kurdish region stopped crude oil exports to Iraq on Sunday, charging Baghdad with failing to pay for deliveries.  

http://www.globalpost.com/dispatch/news/regions/middle-east/iraq/120402/iraqs-central-bank-tightens-restrictions-over-corruption