Iraq reaches US understanding on dollar cash shipments

• Baghdad says it has reached an understanding with Washington to continue shipments of US dollar banknotes to Iraq.
• The move follows US suspension of a roughly $500 million cash shipment in April, with shipments partially resuming in July.

Iraq has reached an understanding with the United States to continue shipments of US dollar cash to the country, Iraqi government spokesperson Haider al-Aboudi said Saturday.

Al-Aboudi told the Iraqi News Agency (INA) that a new shipment is expected to arrive in the coming days. He said the funds would help meet Iraq’s “legitimate foreign currency needs.”

The agreement, he said, comes as Iraq makes progress in strengthening oversight of dollar distribution, regulating its use, expanding electronic payments and gradually moving toward a digital economy.

Washington halted a shipment of about $500 million in US banknotes bound for Iraq in April, amid pressure on Baghdad over attacks by Iran-aligned armed groups and concerns about the use of Iraq’s financial system.

The United States resumed some dollar shipments in July after the months-long suspension. Iraqi officials said the cash was drawn from Iraqi oil revenues held in the Federal Reserve Bank of New York and was used primarily to meet domestic retail and foreign-exchange demand.

The latest understanding comes as Prime Minister Ali Faleh al-Zaidi's government seeks to strengthen financial oversight and its economic relationship with Washington.

Under the post-2003 financial arrangement, Iraq’s oil revenues are deposited in dollar-denominated accounts in the United States before funds are transferred to Iraq or used to pay for imports. The arrangement gives Washington significant oversight over the movement of Iraq’s dollar reserves.

The issue has remained politically sensitive because access to physical dollars can affect Iraq’s foreign-exchange market and the availability of US currency inside the country.

The latest agreement follows reports earlier this month that Washington could again use dollar shipments as leverage in talks with Baghdad over the status of armed groups. However, Iraqi Prime Minister’s financial adviser Mazhar Mohammed Saleh denied those reports, saying Washington had not formally threatened to halt shipments.

Iraqi authorities have not disclosed the value of the shipment expected in the coming days.