US-imposed dollar shortage forces Iraq to tap tax funds for salary payments

Since the 2003 US occupation of Iraq, Washington has controlled Iraq's oil revenues, holding them at the Federal Reserve in New York  

News Desk - The Cradle

Iraq’s Finance Ministry has begun withdrawing from tax deposit reserves to cover public sector salaries amid liquidity restraints caused by delays in US dollar transfers from the US Federal Reserve, Shafaq News reported on 4 May.

A source speaking with the Iraqi media outlet indicated that restricted access to foreign currency and declining dollar levels forced the ministry to use deposited tax funds to meet payroll obligations and essential government expenses.

“Liquidity levels at state-run banks have dropped sharply, prompting most institutions to halt loans and salary advances,” the source added.

The directors of Al-Rafidain and Al-Rasheed banks discussed the withdrawals in private meetings, and the information was later leaked to media outlets, according to the Iraqi Parliament’s Economic Committee.

The Iraqi cabinet granted Finance Minister Taif Sami emergency authorization to access dormant tax deposits, enabling the government to cover salary payments for April and beyond.

Since 2003, a decision issued by Coalition Provisional Authority (CPA) head Paul Bremer has required that all Iraqi oil revenues be paid into an account with the US Federal Reserve, giving it the ability to control how many US dollars are returned to Iraq’s Central Bank, and therefore, its economy.

From that point until today, the Iraqi Ministry of Finance has had to submit requests for funds to the US Treasury, which then approves or denies these requests based on its own criteria.

This monthly transfer of US dollars – which are literally flown into Baghdad in pallets of hard cash – determines Iraq and its 40-million-population’s ability to pay for basic needs such as salaries, food, and medicine.

Whenever Washington feels that Iraq is not compliant with US regional goals, including enforcing economic sanctions on Iran, Iraq’s major trading partner and source of natural gas for electricity production, these fund transfers can be delayed or reduced.