Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

IRAQ

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
Other security restrictionsYes.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Iraq is the Iraqi dinar.
Exchange rate structureUnitary.
Classification
Crawling pegUnder a policy of pursuing exchange rate stability, the Central Bank of Iraq (CBI) limited the fluctuations of the dinar to within ±1%, until October 2006. Since then the CBI has changed its monetary stance and allowed the exchange rate to gradually appreciate following a predetermined path. As a result, the exchange arrangement of Iraq has been reclassified, effective November 1, 2006, to the category crawling peg from the category conventional pegged arrangement.
Within these limits, 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. Exchange bureaus of private banks are permitted to participate at the daily auction but must remain within the bureau’s capital ceiling. 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 up to 20% of a company’s capital.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsPayments to and receipts from Israel are prohibited.
Use of foreign exchange among residentsn.a.
Payments arrangementsNo.
Administration of controlThe CBI is responsible for monitoring exchange controls and determining the extent of delegation of powers to commercial banks through the Anti-Money Laundering Unit, which replaced the Foreign Exchange Department.
Payments arrears
OfficialYes.
Controls on trade in gold (coins and/or bullion)
On external tradeIraqi citizens and noncitizens may bring into Iraq worked and unworked gold, regardless of its weight, provided they declare it on importation. Adult Iraqi citizens may take out with them personal gold jewelry up to 100 grams a person, provided 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 on submission of supporting documents.
On exports
Domestic currencyThe maximum amount allowed is ID 200,000 for adult Iraqis.
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 200,000 for Iraqis and others.
Foreign currencyTravelers may bring in foreign exchange, including currency notes (except for Israeli currency), in unlimited amounts, provided they declare the funds on an exchange control form; amounts not intended to be taken out of the country are exempt from declaration.
References to legal instruments and hyperlinksn.a.
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 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.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents are allowed to open foreign currency accounts at 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.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Domiciliation requirementYes.
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) banks are in compliance with the terms of payment described in the LC, (2) the goods are insured in Iraq to the extent possible, and (3) the bill of lading is the name of an Iraqi bank.
Import licenses and other nontariff measures
Positive listn.a.
Other nontariff measuresn.a.
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.
References to legal instruments and hyperlinksForeign Exchange Department (FED) Note No. 4 of May 10, 2005; CBI Letter No. 13998 of October 18, 2006.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsYes.
Documentation requirements
Letters of creditYes.
GuaranteesYes.
Othern.a.
Export licensesAll exports to Israel are prohibited.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersSome restrictions apply on these transactions.
Trade-related payments
Prior approvalYes.
Indicative limits/bona fide testn.a.
Investment-related payments
Indicative limits/bona fide testn.a.
Payments for travel
Prior approvaln.a.
Quantitative limitsThe limit is up to the equivalent of $10,000 a traveler.
Indicative limits/bona fide testn.a.
Personal payments
Prior approvaln.a.
Quantitative limitsn.a.
Indicative limits/bona fide testTransfers 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’ wagesRemuneration paid to contracted foreign experts, whether with the government or the private sector, may be transferred on submission of supporting documents.
Prior approvalYes.
Indicative limits/bona fide testYes.
Credit card use abroadn.a.
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.
Quantitative limitsDomestic or foreign companies operating in Iraq requesting the transfer of funds abroad must submit proof of the amount of the contract and the percentage that may be converted into foreign exchange.
References to legal instruments and hyperlinksFED Note No. 3 of March 20, 2005; FED Note No. 15 of 2006, cancelling and replacing FED Note No. 6 of July 28, 2005.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsEffective November 30, 2006, a new Investment Law (Investment Law No. 13 of 2006) went into effect to promote investment in Iraq. Restrictions on capital transactions are not enforced; however, documentation and reporting requirements apply.
Repatriation requirementsn.a.
Surrender requirementsn.a.
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.
Controls on liquidation of direct investmentn.a.
Controls on real estate transactions
Purchase abroad by residentsn.a.
Purchase locally by nonresidentsForeign investors may hold long-term and renewable leases of real property but not ownership rights.
Sale locally by nonresidentsn.a.
Controls on personal capital transactions
Loansn.a.
Gifts, endowments, inheritances, and legaciesn.a.
Settlements of debts abroad by immigrantsn.a.
Transfer of assetsn.a.
References to legal instruments and hyperlinksInvestment Law No. 13 of 2006; www.coriraq.net.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadn.a.
Maintenance of accounts abroadBanks may conclude agreements with correspondent banks abroad, subject to CBI approval.
Lending to nonresidents (financial or commercial credits)n.a.
Lending locally in foreign exchangen.a.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsYes.
Liquid asset requirementsYes.
Interest rate controlsn.a.
Credit controlsYes.
Differential treatment of deposit accounts held by nonresidentsn.a.
Investment regulationsEffective November 30, 2006, a new Investment Law (Investment Law No. 13 of 2006) went into effect.
Abroad by banksn.a.
In banks by nonresidentsn.a.
Open foreign exchange position limitsn.a.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Exchange arrangementNovember 1. The exchange arrangement of Iraq was reclassified to the category crawling peg from the category conventional pegged arrangement.
Capital transactionsNovember 30. A new Investment Law went into effect to promote investment in Iraq.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsNovember 30. A new Investment Law went into effect to promote investment in Iraq.

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