Central Bank to allow cash dollar withdrawals under new rules

BAGHDAD — The Central Bank of Iraq said Monday that banks may give customers cash withdrawals in U.S. dollars from foreign-currency deposits and some incoming transfers under new rules taking effect Wednesday, according to a document issued by the bank.

The document says customers may withdraw deposited funds and accrued interest in the same foreign currency their accounts are held in. Banks may continue opening interest-bearing accounts in currencies the central bank accepts, with returns set by each bank’s policies.

Banks will also be allowed to pay incoming transfers from abroad in cash dollars from their own holdings, subject to central bank rules and agreements with customers, the document says. The funds may instead be placed on dollar-denominated bank cards for use inside and outside Iraq.

The document does not authorize unrestricted access to cash dollars supplied by the central bank. It says the bank will meet commercial banks’ cash-withdrawal requests for two categories of incoming transfers when the corresponding funds are deposited into one of its accounts with a correspondent bank abroad.

The first category covers government contracts financed by foreign grants or loans, and agreements with the federal government denominated in U.S. dollars, provided the Ministry of Planning confirms the financing party requires payment in cash dollars inside Iraq. The second covers 40% of the proceeds Iraqi exporters receive from exports abroad.

The document says the measures are meant to help banks meet customers’ legitimate demand for dollars while supporting confidence in the dinar, expanding digital payments and reducing cash transactions.

It also cancels a Central Bank directive issued Dec. 31, 2023. Under that framework, customers kept the right to withdraw dollars deposited in cash, but banks’ ability to pay incoming foreign transfers in physical dollars depended on their own liquidity or whether the transfer qualified for central bank-supplied currency. Those rules were part of efforts to tighten oversight of dollar flows, cut dependence on cash and move transactions into the formal banking system. They also caused confusion over whether dollar withdrawals had been banned entirely, though the restrictions mainly affected the cash settlement of transfers from abroad rather than existing cash deposits.

The new rules take effect Wednesday, July 15.