Sharp criticism of the performance of foreign banks in Iraq: remittance shops with no development plans

On Monday, the head of the Iraq Future Foundation, economic expert Manar al-Obaidi, criticized the performance of foreign banks operating in the country, noting that they are not much different from some local banks that were once called “remittance shops.”

Al-Obaidi explained in a statement received by Shafaq News Agency that money transfers outside Iraq have not been affected despite the decisions to ban some Iraqi banks, noting that the same routes and beneficiaries will continue.

In response to suggestions that the continued remittance flows were due to the weakness of Iraqi banks compared to the strength of foreign banks, Al-Obaidi pointed out that foreign banks do not offer development plans for poor and remote areas, but rather focus their activities on commercial areas for the sole purpose of remittances.

He explained that the combined credit portfolio of foreign banks does not equal 30% of the credit portfolio of Iraqi banks, given the absence of real financing programs for various sectors.

Al-Abidi accused some employees at these banks of bargaining to facilitate transfers, given the weak governance within their departments, with decisions by the managing director or chairman of the board controlling the submitted banking files.

He added that foreign banks do not provide real electronic applications that serve Iraqi citizens, nor have they contributed to any vital projects such as oil refineries or infrastructure.

Al-Abidi pointed out that these banks only have a connection to a US correspondent bank, warning that their activities revolve around generating profits from remittances alone. Once these remittances are closed, they close their branches and return to their home countries laden with profits.

Shafaq.com

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Financial crisis or delayed recovery? What awaits Iraqis?

An Iraqi government advisor reassures that the federal general budget possesses the tools and capabilities to manage the country’s financial life with a high capacity to handle cash flows from oil and non-oil revenues, and maintains a high degree of economic and financial stability in the country.

These assurances come at a time when an Iraqi parliamentarian believes the country is suffering from a clear financial deficit, evident in the Cabinet’s recent decision to withdraw tax revenues. This means the government has reached a point where it is unable to fund salaries. Consequently, it has used tax deposits from contractors to secure employee salaries until the end of the year.

Economists’ opinions varied between optimists who believed the financial crisis was still far off, especially given that Iraq’s central bank reserves exceed $100 billion and the government has plenty of time to confront such challenges. Meanwhile, pessimists expressed pessimism about the economic situation, arguing that the current turmoil could herald a real financial crisis, especially in light of high spending and fluctuating crude oil prices.

Government reassurance

In detail, the Prime Minister’s advisor for financial affairs, Mazhar Mohammed Salih, said, “Since oil revenues constitute nearly 90 percent of the total revenues in the federal general budget, Iraq purchased its oil at an average of $75 per barrel in the first quarter of the year, which is higher than the price set in Federal General Budget Law No. 13 of 2023 (the three-year budget).”

“However, things changed after OPEC+ removed restrictive quotas on member states, which led to lower prices. The price drop will be partially or fully offset by higher quantities sold, as OPEC will review the market situation next month (June) to see if there is an oil glut in the oil market or not,” Saleh added to the agency.

He explained that “the general budget is certainly affected by the oil asset cycle, and it always prioritizes securing essential public expenditures, including salaries, wages, pensions, social welfare, infrastructure projects, and services.”

He continued: “The general budget policy operates on a principle called ‘fiscal space,’ which means using all available financial flexibility to secure revenues, starting with controlling expenditures and spending to the minimum, ideal limits, and ending with maximizing resources, including the available borrowing mechanisms provided by the aforementioned Law No. 13, which provided precautionary funding to address the deficit, amounting to 64 trillion dinars in the most severe cases.”

He pointed out that “the general budget still possesses the tools and capabilities to manage the country’s financial life with exceptionally high capabilities in dealing with cash flows from oil and non-oil revenues, and it maintains a high degree of economic and financial stability in the country.”

Saleh pointed out that “government spending often constitutes nearly half of the gross domestic product, making it crucial for driving the national economy, which continues to operate at a tangible level of stability.”

Financial deficit

However, MP Zuhair al-Fatlawi noted that “there is a financial deficit, and this was clearly demonstrated by the Cabinet’s decision to withdraw tax funds. This means the government has reached a stage where it is unable to finance salaries. Consequently, it has used tax deposits for contractors to secure employee salaries until the end of the year.”

Speaking to Shafaq News Agency, Al-Fatlawi revealed, “There is a significant delay in disbursing investment and operational funds, for example in health departments that suffer from a shortage in purchasing medicines. Some ministries, such as the Ministry of Water Resources, have not yet received funding from their investment budgets, and some ministries are only disbursing their operational budgets, which include salaries, retirement, and the like.”

“As for investment projects, such as the ministries of communications and water resources, the funds allocated for them in the budget law have not been spent,” according to Al-Fatlawi.

He pointed out that “salaries are indeed secured until the end of the year, but there is an actual deficit of 19 trillion dinars, while most projects in the country’s governorates, including those in Babylon, Diwaniyah, and Karbala, have stopped, and have become dependent on favoritism and spending for certain parties over others. Furthermore, money has not been disbursed to contractors who are asking the government for billions of dinars, which affects the quality of work.”

Economic expert Mustafa Al-Faraj agreed with Zuhair Al-Fatlawi regarding the financial deficit Iraq is suffering from, stating that “despite the increase in oil production, Iraq still faces a troubling economic situation that could portend a real financial crisis, especially in light of high spending and fluctuating crude oil prices.”

Speaking to the agency, Al-Faraj said, “The recent withdrawal of deposits from a bank raises serious questions about liquidity stability and confidence in the financial sector, and reflects the fragility of the economic structure in the absence of serious reforms.”

Compensation

For his part, financial and economic expert Safwan Qusay explained that “the process of setting the default price of a barrel of oil in the budget at $70 and the decline in oil prices to below $62 led to an increase in the default deficit, but the government has a range of alternatives to finance this deficit.”

Among these alternatives, Qusay explained to Shafaq News Agency, “are maximizing non-oil revenues, accelerating the collection of taxes (electricity and water), converting stagnant accounts into final revenue, as well as developing the performance of some federal ministries to generate income, in addition to changing the type of land and the possibility of imposing fees on such a procedure.”

Qusay emphasized the importance of considering these alternatives before resorting to domestic or foreign borrowing, and managing government resources with an investment mindset.

The financial expert predicted that “there will be an adjustment in the Ministry of Finance’s share of self-financing fund revenues, and that the deficit in oil revenues will be compensated for by $1.5 billion per month.”

He explained that “the shortfall in these revenues can be compensated for by rationalizing the use of petroleum derivatives domestically and increasing exports. Such a measure requires reconsidering the quantity and quality of fuel used domestically and the possibility of maximizing exports.”

Qusay concluded by stating, “The financial crisis is still far away, especially since Iraq has reserves at the Central Bank of more than $100 billion, which can sustain expenditures at the same level. Meanwhile, the government is considering a range of options and has plenty of time to address such challenges.”

Shafaq.com

Rafidain Bank in a new look: Al-Sudani announces a new banking era in Iraq

Prime Minister Mohammed Shia al-Sudani confirmed on Monday that the government has adopted comprehensive plans for banking reform and contracting with private financial auditing firms, covering all banks. He also indicated that the work of the First Rafidain Bank will be launched with a new look and vision, and in partnership with specialized and well-known banks.

A statement from the Prime Minister’s Office, received by Shafaq News Agency, stated that “Al-Sudani chaired a meeting of the heads of the boards of directors of Iraqi banks, during which the mechanisms for implementing the banking reform plans prepared by the government as part of comprehensive reforms of the economic sector were discussed.”

Al-Sudani stressed, according to the statement, that “all state sectors are linked to the existence of an effective and flexible banking system that relies on modern technologies,” noting that “the government has adopted comprehensive plans for banking reform and contracted with private financial auditing companies, covering all banks, and has made great strides in implementation.” He indicated that “the work of the First Rafidain Bank will be launched with a new look and vision, and in partnership with specialized and well-known banks.”

He pointed to “the formulation of a clear roadmap to address the situation of the private banking sector, as a partner in development,” stressing “the need for cooperation during the next phase to take effective steps to reform the economy,” and affirming “the state’s distancing from detailed intervention in sectors and assuming the role of regulator.”

Al-Sudani pointed to “working to integrate the private sector and foreign companies in all major projects, as well as supporting local productive sectors and absorbing the imported cash flow into providing domestic goods and services to citizens as an alternative to imports and ensuring support for local investment.”

The Prime Minister directed banks to “simplify procedures, participate broadly in the development process, participate as investors in all available opportunities, move toward partnerships with foreign companies, and work to build trust with citizens, which will help ensure they feel secure depositing their money in banks.”

For their part, the heads of the Iraqi banks’ boards thanked the government for its support to the banks and its assistance in solving their problems. They confirmed the rise in credit and financial accreditation indicators, and pointed out the rise in trading via electronic payment from (1.7) trillion dinars in 2020, to reach (21) trillion dinars in 2024. They confirmed their readiness to localize the salaries of private sector workers, and their commitment to restructuring Iraqi banks and the (Oliver Wyman) plan, as it will be a comprehensive solution to most of the problems that the banking sector suffers from, according to the government statement.

Shafaq.com

Exclusive: Iraq continues to import gas and electricity from Iran without interruption.

A member of the Iraqi Parliament’s Electricity Committee, Dahel Radhi, revealed on Monday that Iraq continues to import electricity and gas from Iran without interruption, despite US sanctions imposed on Tehran.

Radhi told Shafaq News Agency, “The Iraqi government is currently working to find alternatives to Iranian gas, by importing electricity from the Gulf Cooperation Council, Jordan, and other countries.”

He added, “There is a move to import gas from Qatar, in addition to the entry of foreign companies into Iraq with the aim of utilizing associated gas to generate electricity.”

The US State Department spokesman said last March that the Trump administration had ended waivers granted to Iraq to purchase electricity from Iran. Reuters quoted the spokesman as saying that Washington would not allow Tehran any form of economic or financial relief.

The head of the Iraqi parliament’s Finance Committee, Atwan al-Atwani, previously sent a letter to the US government stating that halting gas imports from Iran would cause the collapse of Iraq’s electricity grid next summer. This signaled the need to extend the exemptions granted to Iraq in this regard after they were officially suspended by the administration of US President Donald Trump.

Late last month, Prime Minister Mohammed Shia al-Sudani confirmed that all power plants will operate on Iraqi gas by the end of 2027.

Shafaq.com

To avoid embarrassment with Washington, a “hidden” decision disrupts Iraqi parliament sessions.

Independent MP Haitham Al-Fahd accused the Iraqi government on Monday of disrupting parliament sessions, revealing the reasons behind the disruption.

Al-Fahd told Shafaq News Agency, “There is a hidden government decision behind the suspension of the parliament sessions. This suspension is to avoid embarrassing the government, to prevent the Popular Mobilization Law from being passed, and to avoid causing embarrassment with America and the general situation. The same applies to the issue of the salary scale. The government does not want the new scale because it does not have enough funds.”

He added, “There is a will to prevent amendments to the electoral law, and this is a priority for Prime Minister Mohammed Shia al-Sudani. Therefore, the suspension of parliament sessions is a hidden government decision aimed at maintaining the status quo until the next parliamentary elections.”

Last March, the Iraqi parliament completed the first reading of the draft law governing the Popular Mobilization Forces (PMF), which regulates the administrative structure of the PMF, comprising directorates, brigades, and other units. This came after the law governing service and retirement for PMF members was withdrawn from parliament and returned to the cabinet, due to the controversy surrounding it.

In the same month, the Parliamentary Security and Defense Committee demanded that the second reading of the Popular Mobilization Forces (PMF) bill be removed from the parliament’s agenda pending completion of the required legislative procedures.

In early April, Raed al-Maliki, a member of the parliamentary legal committee, stated that the enactment of the Popular Mobilization Forces (PMF) law would close the door on factions and entities operating outside this official military institution.

The Washington Institute for Near East Policy urged the US administration, headed by Donald Trump, to send a “calm and firm” message to the Iraqi government regarding the risks of passing a new law related to the Popular Mobilization Forces (PMF), warning that this legislation could transform the PMF into an entity similar to the Iranian Revolutionary Guard.

In a related development, the director of the Popular Mobilization Forces’ training directorate, Ammar Karim al-Saray, announced that the directorate had begun establishing a military college and academy for the Popular Mobilization Forces. He noted that the academy would be a “factory and nucleus for preparing leaders and commanders who would work side by side with our armed forces to defend the homeland.”

During the conference, Al-Saray announced that “the directorate has begun developing a plan to establish a military college and academy specifically for the Popular Mobilization Forces’ fighters. The directorate has begun holding extensive meetings and seminars and has formed specialized committees to develop appropriate plans for this purpose.” He explained that “appropriate training curricula have been prepared to confront potential threats after a comprehensive study of local, regional, and international colleges and academies to keep pace with military developments.”

Shafaq.com

Ministry of Finance: The Iraqi economy recorded a 5 percent non-oil growth and a decline in the budget deficit.

Finance Minister Taif Sami stated on Monday that the Iraqi economy recorded a 5% growth in non-oil GDP in 2024, while noting that the budget deficit is low and does not pose a threat to Iraq’s public debt. Sami told the official agency, “A high-level government delegation, including Central Bank Governor Ali Al-Alaq, accompanied us and discussed with an International Monetary Fund mission the latest economic and financial developments in Iraq during a meeting held in the Jordanian capital, Amman.”

She added that “the IMF mission found several positive indicators related to the Iraqi economy, most notably a 5% growth in non-oil GDP in 2024, driven by growth in the agricultural sector and increased public spending,” indicating that “expectations indicate continued growth of 4% in 2025.”

She added, “The level of oil GDP will remain dependent on OPEC decisions regarding production ceilings and global crude oil prices.”

Regarding the fiscal deficit, Sami explained that “the deficit reached 5 trillion dinars in 2024, equivalent to 1.5% of GDP, excluding debt repayments and overdue payments for investment and energy projects,” noting that “this is a low level that does not negatively impact the public debt ratio, according to International Monetary Fund estimates.”

The Minister of Finance also stressed the “need to restructure government banks to enable them to absorb government financing instruments and stimulate the market,” noting that “the Ministry of Finance, in cooperation with the International Monetary Fund, will contract with consulting firms to support the Public Debt Department, in addition to appointing new staff with advanced degrees to activate the public debt management and financial analysis system.”

She indicated that “the International Monetary Fund expressed its readiness to provide technical and advisory support to Iraq, particularly in the areas of public debt management, tax reform, and determining the most appropriate tax systems for the Iraqi social situation, through the Middle East Technical Assistance Center (METAC).” She explained that “the delegation and the International Monetary Fund stressed the importance of strengthening the relationship with foreign correspondent banks in the field of financing foreign trade, as well as supporting the use of the Iraqi dinar in economic transactions to maintain the stability of the local currency.”

Burathanews.com

The Prime Minister chairs a meeting of the heads of the boards of directors of Iraqi banks.

Prime Minister Mohammed Shia al-Sudani chaired a meeting on Monday with the chairmen of the boards of directors of Iraqi banks to review the banking sector’s performance and enhance its role in supporting the national economy. A statement from the Prime Minister’s Media Office stated that the meeting discussed several issues related to banking operations and the importance of developing the financial infrastructure to enhance citizen and investor confidence in the Iraqi banking sector.

During the meeting, Al-Sudani emphasized the need to pursue financial and banking reforms to keep pace with global changes, emphasizing the government’s commitment to supporting banks that are serious about implementing development programs and stimulating the economy.

Burathanews.com

In detail, the Minister of Finance explains the mechanism for converting tax deposits into revenue.

Finance Minister Taif Sami explained, on Sunday, the mechanism for withdrawing tax deposits and converting them into final revenue.

Sami said in a press statement, “The special account for tax deposits opened at the Central Bank of Iraq in the name of the Ministry of Finance’s Accounting Department, which concerns the amounts collected from taxpayers, most of which are considered final revenue for the state treasury (tax revenues) according to applicable laws.” She explained that “these amounts are temporarily deposited in an intermediate account, the (tax deposits) account, until the final tax accounting procedures are completed by the taxpayers and the General Tax Authority.

” She added, “Based on this, it is determined whether the tax accounting is equal to the amount paid by the taxpayer as deposits, the deposit amounts are reflected in the final revenue. However, if the tax accounting is greater than the amount paid, the taxpayer pays the difference to the public treasury. However, if the tax accounting is less than the amount paid by the taxpayer, the difference is returned to the taxpayer.”

She continued, “All remaining amounts are reflected in this account after completing the tax accounting as a final revenue for the state treasury (tax revenues),” noting that “withdrawing tax deposit amounts is a normal procedure according to Cabinet Resolution No. (294) of 2025, as these amounts are considered final revenue for the state treasury as the final result of tax accounting.”

The Cabinet resolution, in its 15th regular session held on 4/15/2025, included approval to authorize the Minister of Finance to withdraw tax deposit amounts that are less than five years old, amounting to (3,045,007,500,252) dinars, to finance and pay the salaries of April and subsequent months deposited in the Ministry of Finance’s account at the Central Bank of Iraq (70019), which it will deposit later according to the state’s overall need, provided that the cash settlement is made monthly when requested by reversing the deposit amount from the actual revenues collected monthly when conducting the tax accounting.

The Minister of Finance explained that “the procedure is normal to maximize resource revenues and control them of all kinds,” indicating that “most taxpayers do not visit the departments to complete their tax accounting dues, with the aim of evading the imposed tax.”

She stressed that “the ministry has lists of the names, numbers and amounts of taxpayers and companies that owe money at the General Tax Authority and the Accounting Department, to refer to in the event that taxpayers visit the Authority.”

Sami pointed out that “the remaining amounts reflect:

1- Upon receipt of amounts from taxpayers before final settlement (estimation of the tax amount) from the bank account to the tax deposit account (taxpayer)
2- Upon final settlement with the taxpayer:

A- If the final tax settlement amount is equal to the amount of deposits paid, the entry will beas follows:

From the tax deposit account (taxpayer)
to the final revenue account (tax revenue)

B- If the final tax settlement is greater than the amount paid as deposits, the taxpayer pays the difference as a final revenue to the state treasury according to the following entry:
From the bank account (difference amount) From the taxpayer
to the final revenue account (tax revenue).
She continued that “the tax deposit amounts paid by the taxpayer are reflected as a final revenue according to the following entry:
From / Tax Secretariat (taxpayer)
To the account / Tax revenues

C – If the final tax settlement is less than the amount paid by the taxpayer, the difference amount shall be returned to the taxpayer and the remaining amount shall be reflected in the final revenue according to the following compound entry:
From the account / Tax deposits (the taxpayer)

To the aforementioned
account / Final revenue (Tax revenues)
account / Bank The difference that shall be returned to the taxpayer)

The Council of Ministers decided in its fifteenth regular session held on 4/15/2025 to approve the following:

1- Authorizing the Minister of Finance to withdraw the amounts of tax deposits that are not more than five years old, amounting to (3,045,007,500,252) dinars, to finance and pay the salaries of the month of April and subsequent months deposited in the Ministry of Finance’s account at the Central Bank of Iraq (70019), which it will deposit later according to the need for the total state, provided that the cash settlement is carried out monthly when requested by reversing the amount of deposits from the actual revenues collected monthly when conducting the tax settlement.

2- The ministries, entities not affiliated with a ministry, governorates and governorate councils shall implement the contents of the Ministry of Finance’s circular No. (36) S/357 dated 4/8/2025 (attached), for the purpose of expediting tax accounting and settlement procedures within a maximum of (10) days starting from the date of issuance of this decision.

3- Holding accountable those who fail to implement the provisions of the Income Tax Law (113 of 1982 as amended) and delaying the settlement of financial liabilities resulting from the delay in tax accounting and financing all tax revenue amounts and the amount of tax deposit settlement on a timely basis.

4- The General Tax Authority shall impose the fines stipulated in the provisions of paragraph (4) of Article (56) of the aforementioned Income Tax Law.

Alforatnews.iq

Egypt moves to resume importing 12 million barrels of Basra oil annually.

A government official stated on Sunday that Egypt seeks to resume importing 12 million barrels of Basra crude oil annually from Iraq starting in the third quarter, after a halt that lasted for about a year and a half.

The source told Asharq Al-Awsat that Egypt is in the final stage of negotiations with Iraq to resolve the disputes related to the opening of financial credits for the supply of Iraqi crude oil shipments.

“We expect to resume supplies in the third quarter of this year,” he added.

The source also indicated that negotiations with Iraq “include granting favorable terms to the Egyptian Petroleum Authority, whereby Baghdad will receive payment for shipments supplied to Egypt three months after delivery.”

Baghdad had stopped pumping that amount of Basra crude oil annually to Egypt at the end of 2023, following financial disputes between the two sides.

In April 2017, the Egyptian General Petroleum Corporation (EGPC) signed a commercial contract with the Iraqi State Oil Marketing Organization (SOMO) to supply 12 million barrels of Basra Light crude oil, at a rate of two million barrels per shipment, for a renewable one-year period.

According to official data, the contract between the two parties was being regularly renewed but was suspended at the end of 2023.

Egypt currently imports one million barrels of Kuwaiti oil per month, in addition to one million barrels from Saudi Aramco, through credit facilities.

Shafaq.com