Iraq's new currency regulations: Implications for trade with Iran and domestic currency market

Iraq has enacted a new currency law, prohibiting official exchanges from conducting transactions with five countries, including Iran. This means Iraqi banks and exchange offices will no longer receive allocated currency and must purchase it from the open market at a 20% higher rate. This could lead to complications in receiving foreign currency and increase the price of foreign currency within the country. The central bank's response remains uncertain.

Additionally, the law prohibits market operators in Iraq from engaging in any foreign currency exchanges, both small and large. Sanjabi emphasized that the official exchange rate for the dollar is 1,320 dinars, but in the open market, it is sold for around 1,650 dinars. This significant difference poses challenges for Iraqi importers, as their import costs will rise by 20%. Likewise, Iranian exporters, who sell their goods in dinars, will face a 20% reduction in the value of their export cargo, posing a threat to the trade between the two countries.