As the Iran war ramped up, it was reported that the United States halted dollar cash shipments to Iraq for about three months, before resuming them in early July. The international media coverage of both the halt and the resumption, however, reflected persistent misconceptions about Iraq’s dollar accounts at the Federal Reserve Bank of New York (FRBNY).
One misconception is that the halt deprived the Iraqi government of its own oil revenues held at the FRBNY, leaving it struggling to pay public sector salaries and pensions. Another is that the shipments are needed to keep Iraq’s dollar-dependent economy running or to maintain the peg of the Iraqi dinar to the dollar.
These misconceptions have their roots in the economic and financial chaos that followed the 2003 US invasion of Iraq. Yet they have persisted for years, even as the country’s economy has evolved since then. In fact, Iraq has been moving toward a more formal banking system and away from the cash-based informality that once dominated its economy—a shift that has accelerated since late 2022.
A molehill of a problem
Iraq’s dollar accounts at the FRBNY are essentially two distinct and structurally different accounts; yet they are linked through the conversion of Iraq’s dollar oil revenues to Iraqi dinars. The first is where Iraq’s oil export revenues are deposited. The second is the CBI’s foreign reserves account, which is where the dollars used for cash shipments come from. The CBI withdraws cash dollars from this account and has them flown in regular shipments throughout the year to Iraq, where they are stored in its vaults and later exchanged for dinars to meet demand for cash dollars.
However, the share of the CBI’s reserves held as cash dollars has declined sharply over the years, from 7.9 percent of total reserves at the end of 2014 to 1.5 percent at the end of 2025. Media reports indicated that at least two shipments were withheld, including one worth $500 million, between the first US-Israeli strikes against Iran in late February and the resumption of shipments in early July. It’s reasonable to assume that the total amount withheld was around $1 billion–$1.5 billion.
That may sound like a lot. But how much is it really in the context of Iraq’s economy? The latest budget data from Iraq’s Ministry of Finance (MoF), as of May, and CBI data, as of June, provide some perspective.
Iraq earned oil revenues of $10.9 billion from March through May that were deposited by oil buyers into its oil revenue account at FRBNY. Of this amount, the MoF sold $8.1 billion to the CBI in exchange for buying Iraqi dinars to help fund $22.2 billion in budget expenditures for these three months. The remainder was funded by $5 billion in non-oil revenues and domestic borrowing. This purchase of dollars by the CBI led to an increase in its foreign reserves. The MoF sold a further $1.1 billion in June, which would have been from its oil revenues for the month.
Between March and June, the CBI sold $18.3 billion from its foreign reserves to Iraqi businesses and individuals via banks to pay for imports into Iraq and other cross-border transactions. These dollars came from the same CBI reserves account at the FRBNY that funds the cash shipments. In effect, such transactions are the reverse of the sale of dollars from the MoF to the CBI, thus reducing the CBI’s foreign reserves.
At the same time, the value of the dollar against the Iraqi dinar in the parallel market remained flat between March and July. In other words, the halt in cash dollar shipments had no visible effect on the price of dollars in Iraq, suggesting there was no panic demand for dollars among Iraqis.
The broader data therefore suggests that the withholding of dollar cash shipments had little to no meaningful economic impact. It did not affect the government’s ability to receive its oil revenues in dollars at the FRBNY, convert those dollars into dinars, or use them to fund domestic expenditures. Nor did it constrain the CBI’s ability to use its foreign reserves to finance Iraq’s interactions with the outside world, particularly imports.
The only visible effect, had the shipments remained halted, would have been a squeeze on the supply of cash dollars at airports for Iraqis traveling abroad—and even then, travelers could still have used their bank cards to pay for expenses. The CBI also continued to provide Iraqis traveling abroad, particularly for the Hajj, with physical dollars, supplying $600 million between March and June from the cash dollars held in its vaults.
The absence of any visible economic impact from the most recent halt in cash shipments stands in sharp contrast to what happened the last time they were suspended. In 2015, the United States stopped the transfers amid concerns that dollars were being used by the Islamic State of Iraq and al-Sham and Iranian banks. At the time, the value of the dollar against the dinar in the parallel market increased by about 11 percent, reflecting a sharp increase in demand for dollars.
A mountain of a change
The Iraqi economy has evolved significantly following decades of conflict, particularly as the country has gradually shifted toward greater reliance on the formal banking system. This shift accelerated after the CBI updated its regulations for the provision of dollars for foreign transfers in November 2022, bringing the country’s cross-border fund transfers in line with global standards. Crucially, the new system was the result of two years of planning by the FRBNY, the US Treasury, the CBI, and the MoF.
At the time, those changes represented a seismic shift for a cash-dominated economy in which large informal sectors drove the bulk of economic activity. Yet the initial shock, combined with the raft of measures taken by the CBI and the government since then, helped fast-track the transition toward banking and formal economic activity.
The impact of this transition is evident in the dramatic changes in the CBI’s provision of dollars, both in cash and through transfers, between 2023 and June 2026 compared with the 2015-2022 period.
Source: CBI, as of June 2026.
As the table above shows, two changes in particular stand out. First, international transfers have increasingly shifted to Iraq’s strongest banks, which have correspondent banking relationships with major international banks and whose transactions are reviewed by an international risk-management agency nominated by the FRBNY. The share of these transactions rose from 40 percent in 2023, when they started, to 95 percent in January-May 2026, largely at the expense of the previous transfer system.
Second, cash transactions have become a much smaller share of total cross-border payments. These include the CBI’s provision of cash dollars to Iraqis traveling abroad at airports, the channel most directly affected by a halt in dollar cash shipments.
But the table does not capture another important change: the system introduced after November 2022 to provide these dollars is now among the most closely monitored cash-distribution systems in the world. Yes, cash transactions still have inherent limits to traceability. But for Iraqis obtaining cash dollars, the system captures detailed information, including passport numbers, travel destinations, travel frequency, and the amounts obtained. This gives authorities the information needed to investigate travelers and related parties if questions arise.
All of this points to a broader reality: Iraq’s economy—and particularly its financial sector—has changed dramatically since 2003, and the risks that come with that evolution cannot be properly understood, or addressed, through outdated assumptions. It’s about time media coverage caught up.
Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East Programs and serves as the chief strategist at the AFC Iraq Fund.
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Image: The Central Bank of Iraq building, as the US administration suspends shipments of US dollars to Iraq, in Baghdad, Iraq, April 23, 2026. REUTERS/Ahmed Saad