Chapter

IRAQ

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Iraq is the Iraqi dinar. Effective October 15, 2003, new banknotes were introduced, replacing the “Saddam dinars” at par and the Swiss dinars at a rate of 150 Swiss dinars per 1 new Iraqi dinar.
Exchange rate structureUnitary.
Classification
Managed floating with no preannounced path for the exchange rateEffective October 4, 2003, the exchange rate of the dinar is determined in the foreign exchange market. Auctions are held daily, and eligible bidders may buy and sell foreign exchange at freely determined rates. All final transactions are allocated at a single settlement price. Prior to 2003, the Iraqi dinar was pegged to the dollar, the intervention currency. In practice, however, state banks are allowed to transact at the prevailing market rate, effectively legalizing the parallel market rate.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements with foreign countries normally must be made in any of the listed currencies or in Iraqi dinars from a nonresident account, provided that the funds in the account were obtained originally through credits in any one of the listed currencies. Payments to and receipts from Israel are prohibited.
Payments arrangementsn.a.
Administration of controln.a.
International security restrictions
In accordance with UN sanctionsYes.
Payments arrears
OfficialYes.
PrivateYes.
Controls on trade in gold (coins and/or bullion)
Controls on external tradeResidents and nonresidents may bring into Iraq, free of customs duty, worked and un-worked gold, regardless of its weight, provided that they declare it upon importation. Residents may take out with them worked gold not exceeding five grams a person, subject to declaration; such gold may be brought back into the country on their return. Nonresident Iraqis are allowed to take out worked gold that they brought with them for personal use.
Controls on exports and imports of banknotes
On exports
Domestic currencyThe maximum amount allowed is ID 5.
On imports
Domestic currencyAmounts up to ID 1,000 are allowed.
Foreign currencyTravelers may bring in foreign exchange, including currency notes (other than Israeli currency), in unlimited amounts, provided that they declare the funds on an exchange control form; amounts not intended to be taken out of the country are exempt from declaration.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident Iraqis and resident nationals of other Arab countries are allowed to open foreign currency accounts at the commercial banks and to use the balances in these accounts without restriction, provided the accounts have been credited with foreign banknotes.
Held abroadYes.
Approval requiredYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedNonresident Iraqis and nonresident nationals of other Arab countries are allowed to open foreign currency accounts at the commercial banks and to use the balances in these accounts without restriction, provided the accounts have been credited with foreign banknotes. Nonresident accounts are divided into ordinary nonresident accounts, which involve current payment transactions, and special nonresident accounts, which involve capital transfer transactions. Balances on these accounts and any applicable interest are freely transferable abroad in foreign currencies, provided that the funds had been deposited with licensed dealers within three months of transfer. Effective October 15, 2003, Iraqi nationals residing abroad (or their legal representatives) may withdraw in full the balances held in their nonresident accounts (previously, the limit was up to the equivalent of ID 100,000 a year in three installments) to cover personal expenses in their country of residence. For all other cases, approval is required.
Approval requiredYes.
Domestic currency accountsNo.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetYes.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsYes.
Import licenses and other nontariff measures
Negative listImports of some commodities on a protected list are, in principle, prohibited from all sources.
Import taxes and/or tariffsTo finance the Export Subsidy Fund, a tax of 0.5% is levied on imports of capital goods, and a tax of 0.75% is levied on imports of consumer goods. All imports subject to import duty are also subject to a customs surcharge. Foreign companies undertaking development projects in Iraq are exempt from all import duties and domestic taxes accruing from the implementation of these projects, including income taxes due on the earnings of their non-Iraqi workers.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsYes.
Financing requirementsNo.
Documentation requirementsn.a.
Export licensesAll exports to Israel and exports of certain goods to all other countries are prohibited. The Ministry of Trade may prohibit the exportation of any commodity when supply falls short of domestic demand. All exports are licensed freely through the General Company for Exhibitions and Trading Services.
Export taxesn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersAll payments for invisibles require permission.
Trade-related paymentsInformation is available only for the payment of freight and insurance. Foreign exchange is not granted to merchants to purchase insurance abroad for their exports.
Prior approvalYes.
Payments for travel
Quantitative limitsThe basic allowance for travel to Arab countries, Cyprus, Greece, and Turkey is the equivalent of ID 300 a person a trip for travelers 18 years of age or over (ID 50 for persons under 18 years); the basic allowance for other countries is ID 500 a person a trip for travelers 18 years of age or over (ID 250 for persons under 18 years).
Personal paymentsInformation is available only for payment of medical and study abroad costs.
Prior approvalYes.
Quantitative limitsStudents abroad are allocated a fixed amount in Iraqi dinars to be transferred to the country of their residence, except for certain countries, such as India; the Baltic countries, Russia, and other countries of the FSU; and countries in North Africa, where students are paid a fixed amount in dollars.
Foreign workers’ wagesCertain banks are permitted to transfer salaries of teachers who are nationals of Arab countries employed by the Ministry of Higher Education, and of scientific researchers and medical doctors, in accordance with the terms of their contracts.
Prior approvalYes.
Quantitative limitsCertain nonresident private sector workers who have contracts with public institutions in Iraq are permitted to transfer the amounts provided for in those contracts. Those not employed under contracts may transfer abroad a monthly amount equivalent to ID 10 a person if not insured and ID 20 a person if insured and working in the private sector. Skilled noncontractual workers employed in the nationalized sector by the government are entitled to ID 40 a person a month. Persons under 16 years or over 55 years of age, however, are not allowed to transfer their earnings abroad.
Other payments
Prior approvalYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsForeign exchange receipts in excess of the equivalent of ID 100 must be surrendered to a licensed dealer within three months.
Restrictions on use of fundsn.a.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsMost capital transactions abroad by residents, whether Iraqis or foreign nationals, require prior approval from the MOF.
On capital market securities
Shares or other securities of a participating nature
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Purchase abroad by residentsYes.
On money market instrumentsControls apply on all these transactions.
On collective investment securities
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsn.a.
Controls on credit operations
Commercial creditsYes.
Financial creditsYes.
Guarantees, sureties, and financial backup facilitiesYes.
Controls on direct investment
Outward direct investmentAll investments abroad by residents, whether Iraqis or foreign nationals, require prior approval.
Inward direct investmentNo foreign (defined as non-Arab) participation is allowed in the capital of private sector companies, but citizens of other Arab countries may participate with Iraqis in projects in the industrial, agricultural, and tourism sectors; participation is encouraged by the Arab Investment Law. The law permits (1) Iraqi investors to hold up to 49% of an enterprise, provided that their contribution and profits are paid in Iraqi dinars and that the minimum capital of the enterprise is the equivalent of ID 0.5 million; (2) Arab investors to transfer annually up to 100% of the profits distributed to them, but not exceeding 20% of their paid in capital; and (3) nationals of Arab countries to bring capital into Iraq in Iraqi currency for industrial and agricultural investments. Arab investors are allowed to transfer capital in a convertible currency through a licensed bank or physical assets that will be used in the enterprises they are planning to establish, provided that used machinery and equipment have at least one-half of their productive life left.
Controls on liquidation of direct investmentYes.
Controls on real estate transactions
Purchase locally by nonresidentsYes.
Controls on personal capital transactions
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Transfer of assets
Transfer into the country by immigrantsYes.
Provisions specific to commercial banks and other credit institutions
Investment regulationsYes.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsn.a.
Changes During 2003
Exchange arrangementOctober 4. The exchange rate of the dinar is determined in the foreign exchange market.
October 15. New banknotes were introduced, replacing the “Saddam dinars” at par and the Swiss dinars at a rate of 150 Swiss dinars per 1 new Iraqi dinar.
Nonresident accountsOctober 15. Iraqi nationals residing abroad (or their legal representatives) were allowed to withdraw in full the balances held in their nonresident accounts to cover personal expenses.

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