Iraqi Central Bank Bans US Dollar Transactions with International Developme

Baghdad — October 22, 2026

The Central Bank of Iraq has issued a firm directive to all licensed banks and non-bank financial institutions in the country, prohibiting any financial transactions in U.S. dollars with the International Development Bank (IDB). The relevant entities are required to implement this decision immediately. This measure was mandated via an official communication (Ref: 9/8/1249) issued by the Central Bank’s Banking Supervision Department.

This move comes in response to sanctions imposed on the bank by the U.S. Department of the Treasury on October 15, following allegations that the institution facilitated the transfer of U.S. dollar funds to Iran. For its part, the International Development Bank has denied these allegations, affirming its full readiness to cooperate with the Central Bank of Iraq and the U.S. Treasury through official legal channels, while emphasizing its commitment to protecting the rights of all depositors and clients.

Regarding the procedural specifics, the current ban is limited exclusively to transactions denominated in U.S. dollars; no directive has been issued to suspend the bank’s general operations or to prohibit dealings with it in other currencies. In a related context, the U.S. Department of the Treasury has issued a temporary general license authorizing the winding down of specific transactions involving the bank, subject to certain conditions, with a deadline extending until October 30, 2026.

Despite these measures, a sense of anticipation and concern persists among clients regarding the future of dollar-denominated banking services—particularly given the lack of clarification in the official correspondence concerning the precise mechanism that will be used to handle depositors' funds and their foreign currency deposits.