Iraq's central bank said on Wednesday it planned to allow trade from China to be settled directly in yuan for the first time, in an attempt to improve access to foreign currency.
The central bank has been taking urgent steps to compensate for a dollar shortage in local markets, which prompted the cabinet to approve a currency revaluation earlier this month.
"It is the first time imports would be financed from China in yuan, as Iraqi imports from China have been financed in dollars only," the government's economic adviser, Mudhir Salih, told Reuters on Wednesday.
The central bank could, as part of its plan, boost the balances of Iraqi banks that have accounts with Chinese banks in yuan, it said in a statement.
The first option would depend on the central bank's yuan reserves, while the other would use the bank's US dollar reserves at JP Morgan and DBS. The two banks would convert the dollars to yuan and pay the final beneficiary in China, Salih explained.
The expert in economic affairs, Nabil Jabbar Al-Tamimi, said that the second package of the central bank measures wouldn’t differ from the first except for trading with China in yuan.
The Iraqi local market is suffering from difficulty in passing the remittances, especially small remittances for merchants.
The second package wouldn’t resolve the crisis of the high exchange rate of the dollar in the local market, he added.
Yet, the continued increase of the central bank sales and the remittances could resolve the dollar crisis in the two coming months, according to Tamimi.
