Central Bank of Iraq Halts Yuan Transactions Amid Federal Reserve Concerns

Summary:
In a significant move, the Central Bank of Iraq has ceased transactions in Chinese yuan following accusations from the US Federal Reserve of "inflating transfers." This decision is predicted to increase the US dollar exchange rate and inflation, adversely affecting Iraqi families. Central Bank Governor Ali Al-Alaq is currently in the US to discuss the situation.
Economists have criticized the decision, highlighting its potential to disrupt trade relations and inflate the local market. They note that trade with China, Iraq’s second-largest trading partner, is substantial.
The US decision is viewed by some experts as politically motivated, reflecting the broader geopolitical struggle between the US and China. This has allowed China to gain a significant foothold in Iraq’s market, which concerns Washington.
To address the accusations, the Central Bank of Iraq is considering measures like linking bank transfers to goods at border crossings, hiring a new remittance management company, and converting dollars through Iraqi banks linked to major US banks. These steps aim to stabilize the economy and address international concerns over money laundering and currency smuggling.