Iraq’s Central Bank warns banks against extra fees on dollar sales

BAGHDAD — The Central Bank of Iraq on Tuesday renewed its warning to banks and electronic payment companies not to add unjustified fees or margins to dollar transactions for traders and travelers.

Banks and payment companies buy dollars from the Central Bank at 1,510 dinars and may keep 10 dinars per dollar for profit and commissions when they sell at the official rate of 1,520, Mahmoud Dagher, an adviser to the Central Bank governor and the bank’s spokesperson, said in an interview with Al-Rabiaa TV.

“The Central Bank provides dollars at the official rate to traders and travelers, and to every registered trader who has documents and bank accounts,” Dagher said.

The bank on Sunday told banks and payment companies to apply the official rate of 1,520 dinars per dollar to card payments made abroad, to set out every commission clearly and to keep fees to a minimum, according to its statement.

“The Central Bank’s latest circular is a reminder to banks not to impose large additional commissions on the official exchange rate when transferring money for traders or when cards are used,” Dagher said.

He urged banks and payment companies to comply and not to add margins that burden customers and push the cost of dollars far above the price banks pay for them. “The Central Bank sells dollars to banks and payment companies at 1,510 dinars and gives them 10 points to generate profits and cover commissions,” he said, referring to the 10-dinar margin.

Dagher said most Iraqi travelers buy cash dollars at the official rate and carry cards that work abroad at 1,520 dinars per dollar. Some of Iraq’s trade, however, is with countries where it has no correspondent banking ties, which makes it hard to supply dollars for that trade, he said.

“There is oversight of payment companies and banks by the Central Bank, and we are trying to prevent the exploitation of the devaluation of the Iraqi currency by adding unnecessary margins and creating a gap between the official rate and the market rate,” he said.

He said that gap would last as long as trade bypassed official channels: “As long as there are borders that are not fully controlled and foreign trade taking place outside official channels, this will be reflected in a difference between the official rate and the market rate.”

Baghdad exchange shops sold $100 for 169,000 dinars on Sunday morning, according to 964media’s daily rate check, about 11% above the official 152,000.

Bank cards now allow spending of up to 5 million dinars (about $3,300 at the official rate) a month, so travelers need not carry cash, Dagher said. “Many Iraqis travel every year and spend large amounts of money,” he said. “This should be at the official rate of 1,520 dinars, and the Central Bank is serious about monitoring the margins added by banks.”

He said the Central Bank was preparing a project to bring small traders into the payment system. Small traders complain that they cannot get dollars at the official rate and must turn to the parallel market, which pushes prices up, he said.

Dagher said account openings, card issuance and electronic payments, particularly inside Iraq, had grown clearly over the past three years, and that domestic payments made this way now ran into trillions of dinars. “This would not have been possible without cooperation between payment companies, the government and the Central Bank, because it affects the money supply by reducing the issuance of cash,” he said.

“Our problem is that our society likes cash, while the world is moving toward combating its use. The reason is that corruption lies in cash,” Dagher said.

He said Iraq wanted to move all its payments, however small, to electronic systems. “No corrupt person transfers money to another corrupt person through a card, because the amounts involved in corruption are large and tracing them becomes easy,” he said.

More than 85% of Iraq’s cash supply sits outside the banking system, much of it held in people’s homes, the head of the state-owned Trade Bank of Iraq said in September.

In July, the bank cut the monthly cash dollar allocation for travelers from $3,000 to $2,000 under rules it said were meant to improve foreign currency management and encourage the use of electronic payment cards. It described the changes as “purely regulatory.” Since Nov. 3, travelers have been able to buy $3,000 in cash at the official rate, up from $2,000, once every two months and up to six times a year.

The official public rate has been 1,520 dinars per dollar since Oct. 7, up from 1,320, when the government devalued the dinar. It was the first major change since February 2023, when the government strengthened the dinar from 1,470 to 1,320 to stabilize prices and protect purchasing power, reversing part of a devaluation in late 2020.