Iraq To Allow China Trade To Be Settled In RMB Yuan
Iraq’s Central bank said today (Wednesday February 22) it has planned to allow trade from China to be settled directly in RMB 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 follows neighbouring Iran’s decision to do the same.
The government’s economic adviser, Mudhir Salih, said “It is the first time imports would be financed from China in RMB Yuan, as Iraqi imports from China have previously been financed in US dollars only.”
The move is the latest sign of the RMB 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 Iraqi Central bank could, as part of its plan, boost the trade balances of Iraqi banks that have accounts with Chinese banks by increasing RMB Yuan holdings.
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 RMB 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.