The Central Bank of Iraq (CBI) is reportedly drafting new payment terms under which Iraq's international traders will be required to do business on bank guarantee or letter of credit (L/C) terms.

According to a CBI official, the new payment terms respond to concerns over suspect transactions and foreign currency smuggling.

Murky deals

Deputy governor of CBI, Muzher Mohammed Saleh, has told local media that while Iraq is apparently paying more and more US dollars for imports, the volume of goods entering Iraq is substantially decreasing.

"This means that there are some murky deals and smuggling of foreign cash," according to Saleh.

Cash drain

The deputy governor reckons that more than US$4 billion a month exits Iraq but the value of imports coming into the country is reckoned to be worth much less.

Saleh warned that without restrictions and vetting, Iraq's foreign currency store may be substantially depleted or potentially even emptied.

Trade only

The central banker says he believes Iraq should insist that traders use either bank guarantees and L/Cs so that no hard currency leaves Iraq for purposes other than trade.

He says the use of bank guarantees and L/Cs will make it easier for the CBI to determine whether money exiting Iraq has been used to pay for goods or not.

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