Iraq's central bank plans direct RMB settlement for trade from China

Iraq's central bank announced on Wednesday its plan to allow direct renminbi settlement for the first time for trade from China.

The central bank will boost the balances of Iraqi banks that have accounts with Chinese banks in yuan, according to the bank's Wednesday statement. However, this is largely dependent on the central bank's yuan reserves, Mudhir Salih, the Iraqi government's economic adviser, was quoted saying by Reuters.

Salih stressed that it will be first time that imports would be financed from China in yuan, as Iraqi imports from China have been financed in US dollars only.

According to Ministry of Foreign Affairs, the total bilateral trade value between China and Iraq surged 51.7 percent year-on-year to exceed $24.8 billion in the first half of 2022.

Iraq central bank's latest move is addressing the country's dollar shortage, as the US Federal Reserve has imposed tighter controls on dollar transactions by Iraqi commercial banks since November.

The central bank can also boost local banks' balance via the former's accounts with JP Morgan and Development Bank of Singapore, according to the statement. The latter two banks would convert dollars to yuan and pay the final beneficiary in China, explained Salih.

Covering the imports of the private sector, the new measures will not include oil trade in Iraq, he added.

Iraq is OPEC's second largest producer, with crude oil exports accounting for over 90 percent of the country's annual fiscal income. According to Iraq's Ministry of Oil, the country exported more than 1.2 barrels of crude oil in 2022, with the total revenue amounting to $115 billion.

shijing@chinadaily.com.cn