Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

IRAQ

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of March 31, 2005)

Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Iraq is the Iraqi dinar.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementUnder a policy of pursuing exchange rate stability, the Central Bank of Iraq (CBI) has limited the fluctuations of the dinar to within ±1 percent. As a result, the exchange regime has been reclassified, effective May 1, 2004, to the category conventional fixed peg from the category managed floating with no predetermined path for the exchange rate. 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. Brokerage companies buying and selling foreign currencies are authorized to charge commissions in Iraqi dinars not exceeding 0.25% for purchases and 0.5% for sales. Effective September 12, 2004, exchange bureaus are not permitted to exceed the amount of capital earmarked for them when buying foreign exchange at an auction and must remain within the bureau’s capital ceiling. Effective November 4, 2004, the amounts of letters of guarantee issued to the CBI by brokerage companies to ensure against the misuse of foreign exchange transfers, and to ensure good performance by brokerage firms in buying and selling foreign currencies authorized by the CBI and compliance with relevant instructions, are reduced to 20% for a company’s capital (previously, 40% if capital for companies operating only in Iraq, or 60% of capital for companies operating in Iraq and abroad).
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsPayments to and receipts from Israel are prohibited.
Payments arrangementsNo.
Administration of controlThe CBI is responsible for monitoring exchange controls and determining the extent of delegation of powers to commercial banks.
International security restrictions
In accordance with UN sanctionsYes.
Payments arrears
OfficialYes.
Controls on trade in gold (coins and/or bullion)
Controls on external tradeIraqi citizens and noncitizens may bring into Iraq worked and unworked gold, regardless of its weight, provided that they declare it upon importation. Adult Iraqi citizens may take out with them personal gold jewelry up to 100 grams a person, provided that they agree to bring the jewelry back on return. Noncitizens are allowed to take out gold jewelry that they brought with them for personal use up to the amount previously imported and declared.
Controls on exports and imports of banknotesAmounts in excess of the limits below may be transferred for purposes of importing goods or making external payments not made through the banking system upon submission of supporting documents.
On exports
Domestic currencyThe maximum amount allowed is ID 100,000 for adult Iraqis and ID 5 for others.
Foreign currencyThe maximum allowed is $10,000 or its equivalent for adult Iraqis. Foreigners may take out the amount imported and declared up to one year from the date of importation.
On imports
Domestic currencyThe maximum allowed is ID 1,000 for Iraqis and others.
Foreign currencyTravelers may bring in foreign exchange, including currency notes (except for 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, resident nationals of other Arab countries, and domestic and foreign companies are allowed to open foreign currency accounts at the commercial banks and to use the balances in these accounts for domestic and foreign payments and transfers in accordance with banking procedures, provided documents are submitted proving that the accounts have been credited with foreign currency.
Held abroadYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents 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 currency.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementsYes.
Letters of creditBanks are authorized to open or accept LCs relating to the import or export of permitted goods. The relevant amount is transferred subject to the following conditions: (1) compliance with the terms of payment described in the LC; (2) the goods must be insured in Iraq to the extent possible; and (3) the bill of lading must be in the name of the Iraqi bank.
Import licenses and other nontariff measures
Negative listImports of some commodities on a protected list are prohibited from all sources. Imports from Israel are prohibited.
Import taxes and/or tariffsAll imports are subject to a 5% import duty (“reconstruction levy”), except food, medicine, medical equipment, clothing, books, and goods delivered as humanitarian assistance. Imports by coalition forces, nonprofit organizations, foreign governments, and foreign companies undertaking reconstruction projects in Iraq are also exempt from all import duties.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesAll exports to Israel are prohibited.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo restrictions on these transactions are enforced; however, documentation and reporting requirements apply.
Personal payments
Indicative limits/bona fide testEffective March 20, 2005, transfers of tuition fees require proof of current enrollment. Transfers for medical treatment require a medical report certified by a competent medical authority. Transfers for subscriptions of journals require documentation of the subscription.
Foreign workers’ wages
Indicative limits/bona fide testRemuneration paid to contracted foreign experts, whether with the government or the private sector, may be transferred upon submission of supporting documents.
Other payments
Prior approvalIn the case of payments and transfers that banks are not explicitly authorized to make, prior approval of the CBI and compliance with the anti–money laundering law are required.
Indicative limits/bona fide testWhen domestic or foreign companies operating in Iraq submit requests to transfer funds abroad, the company requesting the transfer must submit proof of the amount of the contract and the percentage that may be converted into foreign exchange.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsRestrictions on capital transactions are not enforced; however, documentation and reporting requirements apply.
Controls on capital and money market instrumentsn.a.
Controls on derivatives and other instrumentsn.a.
Controls on credit operationsn.a.
Controls on direct investment
Inward direct investmentAll economic sectors are open for foreign investment, except direct and indirect ownership of natural resource firms involved in primary extraction and initial processing. Foreign investors involved in retail sales are required to deposit $100,000 in a non–interest bearing account in an Iraqi bank for the duration of the retail activity. Foreign investors may hold long-term and renewable leases of real property, but not ownership rights.
Controls on liquidation of direct investmentn.a.
Controls on real estate transactions
Purchase locally by nonresidentsYes.
Controls on personal capital transactionsn.a.
Provisions specific to commercial banks and other credit institutions
Maintenance of accounts abroadBanks may conclude agreements with correspondent banks abroad, subject to CBI approval.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2004
Exchange arrangementMay 1. The exchange regime was reclassified to the category conventional fixed peg from the category managed floating with no predetermined path for the exchange rate.
September 12. Exchange bureaus were not permitted to exceed the amount of capital earmarked for them when buying foreign exchange at an auction.
November 4. The amounts of letters of guarantee issued to the CBI brokerage firms with respect to the buying and selling of foreign currencies, were reduced to 20% from 40% of capital for companies operating only in Iraq and from 60% of capital for companies operating in Iraq and abroad.
Changes During 2005
Payments for invisible transactions and current transfersMarch 20. Supporting documentation was required for certain personal payments.

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