Iraq’s central bank said on Wednesday that it would enable commerce with China to be settled directly in yuan for the first time to boost access to foreign currency.
The central bank has been acting quickly to compensate for a dollar shortfall in domestic markets, prompting the cabinet to authorize a currency revaluation earlier this month.
“It is the first time that imports from China would be financed in yuan, since Iraqi imports from China had hitherto only been financed in (US) dollars,” said the government’s economic advisor, Mudhir Salih, Reuters on Wednesday.
As China steadily opens up its financial markets and some nations try to diversify their currency exposures, the move is the most recent indication of the yuan’s expanding influence on the global arena.
According to a statement, the central bank may increase the yuan balances in Iraqi banks’ accounts with Chinese banks as part of its strategy.
Another choice, it said, would be to use the central bank’s accounts at JP Morgan and the Development Bank of Singapore (DBS) to increase the balances of local banks.
The first option would rely on the yuan reserves of the central bank, while the second would utilize the bank’s dollar holdings at JP Morgan and DBS. Salih stated that the two banks would exchange the dollars for yuan and pay the intended recipient in China.
