CBI allows settling transactions with China in Yuan.. Expert says it is irrelevant
Shafaq News/ 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.
The move is the latest sign of the yuan's growing role on the international stage as China gradually opens up its financial markets and some countries look to diversify their currency exposures.
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.
Another option would be to boost local banks' balances via the central bank's accounts with JP Morgan and Development Bank of Singapore (DBS), it added.
The first option would depend on the central bank's yuan reserves, while the other would use the bank's U.S. dollar reserves at JP Morgan and DBS. The two banks would convert the dollars to yuan and pay the final beneficiary in China.
"These measures, however, do not iteratively cut ever closer to the core of the problem. They do not address depreciation, and the Iraqi forex market remains unable to pass transfers, particularly small remittances, with much ease," financial expert Nabil Jabbar al-Tamimi told Shafaq News Agency.
"Albeit irrelevant to the CBI's recent measures, the growing forex sales in the nearly daily auctions might be depicted as a good sign," he concluded, "if the bank maintains this momentum, the dollar crisis can be resolved in a matter of a month or two."
