The government forms a higher committee to adapt Iraqi banks to international financial requirements

Prime Minister Mohammed Shia al-Sudani announced on Thursday the formation of a higher committee to address the work of Iraqi banks in accordance with international financial requirements, while directing private banks to build balanced relations with financial institutions, Arab banks and investors.

Al-Sudani’s media office stated in a statement received by Shafaq News Agency that the latter received today the head of the Private Banks Association and a number of directors of private banks, and was informed of the problems facing the banking sector in Iraq.

Al-Sudani referred to the measures taken by the government to support the private sector in general, and the banking sector in particular, as part of the priority of economic reform, in which the government has made advanced progress.

He explained that “there is no alternative but to have capable Iraqi banks that adopt all financial standards to participate in development and building the country,” stressing the importance of the Banking Association dealing with government trends and investing in opportunities.

He pointed out the readiness of Arab and foreign banks whose representatives visited Iraq to cooperate with the government in implementing its vision and development plans.

Al-Sudani announced the formation of a higher committee to develop treatments for the work of banks, to be in line with the requirements of work in the international financial arena, confirming the Central Bank’s contract with Oliver Wyman Company with the aim of developing the banking and financial sector.

He directed the Association of Banks to build balanced relations with financial institutions, Arab banks and investors to support banking work. He also directed the preparation of a draft resolution to be presented to the Council of Ministers, which includes obligating ministries to provide facilities that support the banking sector in Iraq.

Shafaq.com

Central Bank Governor: We have put in place methods to secure the provision of dollars and are subject to strict supervision

The Governor of the Central Bank of Iraq, Ali Al-Alaq, announced today, Wednesday, that all transfers are subject to auditing, while indicating that the decline in oil prices has nothing to do with the rise in exchange rates.

Al-Alaq told the official agency that “the Central Bank provides the dollar at the official price to all commercial and personal channels, travelers, and all types of operations that represent legitimate activities, operations, and requests.”

He pointed out that “any price outside the country is a price that only indicates the presence of abnormal operations that attempt to get out of the official and legal system and the correct fundamental channels,” stressing the need to “focus on the amount of sales carried out by the Central Bank at the official price and those requesting the dollar, whether they are traders, importers, individuals, or travelers.”

He pointed out that “methods have been put in place for each channel that ensure the provision of the dollar on the one hand, and a very large degree of oversight to verify the integrity of the prior operations before they are implemented,” noting that “this is a major shift in foreign transfer operations, as they were previously audited at a later stage, and today all transfer operations are not carried out or implemented except after being subjected to the auditing process.”

He explained that “the decline in the price of oil has nothing to do with the rise in the exchange rate because Iraq has foreign currency reserves that enable it to defend the exchange rate.”

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In preparation for the withdrawal of the international coalition.. Al-Sudani directs the army to be equipped with an advanced air defense system

Today, Wednesday, the Commander-in-Chief of the Armed Forces, Mohammed Shia al-Sudani, directed the army to be equipped with an advanced air defense system, in preparation for the withdrawal of the international coalition forces.

A statement by the Parliament’s media department received by Al-Maalouma Agency stated that “the Parliamentary Finance Committee, headed by Atwan Al-Atwani, hosted the Chief of Staff of the Army, Lieutenant General Abdul Amir Yarallah, and the senior staff of the Ministry of Defense, to discuss the investment and operational budget of the ministry and ways to achieve optimal investment and spending of these allocations.”

The committee chairman stressed “the importance of the Ministry of Defense’s commitment to contracting with the Military Industrialization Authority to meet its needs for local products in support of the nation’s economy.”

He added, “The meeting also discussed the ministry’s preparations and priorities, including equipping the army with advanced weapons and strengthening the air defense fleet with advanced aircraft and equipment, as part of Iraq’s readiness to take over the entire security file from the international coalition forces.”

He added that “the Finance Committee attaches great importance to the Ministry of Defense, as it has allocated large funds in the budget to it, which will enable the army to carry out its assigned tasks, most notably preserving sovereignty and defending the homeland,” stressing “the need to diversify sources of armament so that it conforms to specifications and is from global sources, and keeps pace with global technological development,” calling for “focusing on developing our air defenses to be able to confront any potential external attacks.”

The statement confirmed that “the Chief of Staff of the Army reviewed the development plans and programmes, combat and armament capabilities, and concluded contracts, highlighting the most prominent obstacles facing the armament file, including contracts and FMS agreements.”

Yarallah pointed out that “the Commander-in-Chief of the Armed Forces directed the army to be equipped with an advanced air defense system, in preparation for the withdrawal of the international coalition forces,” noting that “the Prime Minister will soon announce the end of the mission of foreign forces in the country.”

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The judiciary and the State Council confirm that the Governor of the Central Bank of Iraq is subject to the legal retirement age

The State Council and the Supreme Judiciary settled the controversy over the continuation of the Governor of the Central Bank of Iraq, Ali Al-Alaq, in his position after reaching the legal retirement age.

The two councils confirmed in documents reviewed by Shafak News Agency that the legal age for retirement is 60 years, and upon reaching it, the duties of the official assigned to it end.

According to the documents, the House of Representatives clarified the legal position of Al-Alaq continuing in his position by addressing the State Council, which confirmed that Al-Alaq is included in the State Employees Law, noting that it had previously had an opinion on this matter on August 26, 2019.

In turn, the Supreme Judicial Council confirmed what was approved by the State Council regarding the inclusion of heads of independent bodies in the State Employees Law.

Shafaq.com

Economic Analysis: The Impact of Declining Private Sector Deposits on the Iraqi Banking System

An unofficial Iraqi financial report revealed a significant decline in the acquisition of private sector deposits by 12 local banks, compared to a significant increase in the share of banks that have banking relationships with American financial institutions. This shift is considered a significant turning point in the Iraqi financial landscape, and it not only reshapes the banking sector, but also has a significant impact on the Iraqi economy in general and on the daily lives of citizens.

The rise of US-linked banks
According to a report issued by the Iraq Future Foundation for Economic Studies and Consultations, three Iraqi banks with correspondent relationships with US banks accounted for about 47% of total private sector deposits in the Iraqi banking system in the first half of 2024, a significant increase from the 34% they accounted for in 2019. In contrast, local banks without international financial relationships saw their share of deposits decline, falling from 42% in 2019 to 36% in mid-2024.

This trend is expected to worsen, with US-linked banks expected to account for more than 50% of private sector deposits by the end of 2024. The Central Bank of Iraq has acknowledged that reliance on correspondent banks for external transfers plays a crucial role in this new distribution of deposit shares. But this shift has far-reaching implications for the Iraqi financial system and its citizens.

Impact on the Iraqi economy
Loss of confidence in local banks The decline in deposits in local banks that lack US correspondents is the result of several factors, including corruption and liquidity risks. Banking expert Abdulrahman Al-Shaikhli explained that corruption in these institutions undermines trust between depositors and banks. This can limit banks’ ability to attract deposits and maintain liquidity, hampering their role in financing the economy.

This loss of confidence could exacerbate Iraq’s liquidity crisis, reducing capital flows to local businesses and hampering economic growth. When private banks fail to inspire confidence, individuals and businesses may refrain from depositing or turn to alternative banking options, limiting the capital available for lending and investment.

Capital concentration The increasing dominance of U.S.-linked banks is leading to a concentration of capital in a few institutions, potentially leading to monopolistic trends in the Iraqi financial sector. While these banks may provide greater stability due to their international connections, they may reduce competition in the market, creating inefficiencies. This concentration could lead to higher borrowing costs for Iraqi businesses, particularly small and medium-sized enterprises that rely on domestic financial services.

In an economy like Iraq, where diversification away from oil is essential, the banking sector plays a crucial role in supporting new sectors. Weak local banks could hamper financing of vital sectors such as agriculture, industry and non-oil exports, which are critical for long-term sustainable growth.

Restricting access to financial services The decline of local banks means that many Iraqi citizens, particularly in rural or underbanked areas, may face reduced access to basic banking services. Banks affiliated with the United States may focus on large clients, leaving small businesses and individual depositors with fewer options. This could increase financial exclusion, making it harder for ordinary Iraqis to obtain loans, save money, or conduct everyday banking transactions.

Moreover, reputational risks associated with corruption in some local banks may make citizens reluctant to deal with these institutions, limiting their ability to participate in the formal economy. This may push more people to use informal financial channels, increasing the risk of fraud or loss, and weakening the stability of the economy as a whole.

The suffering of traders and private sector workers Traders also expressed their concerns about the difficulties they face in conducting financial transactions through Iraqi banks. Ahmed Al-Fahd, a member of the Federation of Chambers of Commerce in Baghdad, pointed out that the procedures related to financial transfers via the electronic platform are often complicated and time-consuming, sometimes reaching 10 days. This creates delays and uncertainty for traders who rely on fast transfers to complete international trade operations, especially with regard to imports.

This low efficiency in the banking system leads many traders to resort to cash transactions or international banking options, which reduces confidence in local banking institutions and complicates efforts to monitor financial flows and regulate them according to international standards.

The CBI’s reforms, which aim to expand electronic financial transactions and provide new benefits to depositors, are essential steps to modernize the banking sector. However, these measures must be accompanied by stronger efforts to combat corruption, enhance transparency, and restore trust in local institutions. Without addressing these fundamental issues, the divergence between U.S.-linked banks and local banks could deepen, leading to a banking system divided as some institutions dominate the market while others struggle.

This evolving situation poses challenges to the stability of the Iraqi economy as a whole. A well-functioning and stable banking sector is essential to foster investment, support businesses, and build public confidence in the financial system. As the government seeks to attract foreign investment and encourage private sector growth, the stability and efficiency of the banking system will be of paramount importance.

In conclusion, the current trend of deposit concentration in banks affiliated with U.S. financial institutions reflects deeper issues within the Iraqi banking system, including corruption, inefficiency, and the inability of local banks to inspire confidence among depositors. While these banks may provide greater stability, their increasing dominance risks marginalizing local institutions and restricting access to basic financial services for many Iraqis. The government and the Central Bank of Iraq should prioritize reforms that aim not only to modernize the financial system but also to restore confidence in local banks. Addressing these challenges is critical to ensuring sustainable economic growth, stability, and prosperity for Iraqi citizens.

Economic Studies Unit / North America Office

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Giant American aircraft land at Ain al-Assad base

A security source in Anbar Governorate revealed, on Monday, that Ain al-Assad Air Base witnessed the landing of giant cargo planes in the base building, west of Anbar.

The source said in a statement to Al-Maalouma Agency, “The Ain al-Assad base in the Al-Baghdadi area in the Hit district, west of Anbar, witnessed the landing of giant American transport planes designated for transporting fighters and military vehicles, without knowing what these planes were carrying, which covered the skies of the western regions.”

He added, “Ain al-Assad base witnessed an unusual movement of military transport aircraft that landed inside the base building amid unprecedented precautionary measures.”

He added that “the American warplanes flew intensively over the base building to provide security protection for these aircraft, and the American forces tightened security protection measures over the base building and the areas near it for security reasons.”

He confirmed that “American warplanes and drones carried out unprecedented aerial survey operations before the landing of the cargo planes.”

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Iraqi banks.. A classical mentality that prevents keeping pace with global development by preferring “government” over “private”

Iraq is moving towards restructuring government banks, after this apparatus became unable to provide modern banking services, and it became burdened with a deep legacy of accumulated burdens, credit defaults, and other problems.

The demands for restructuring came after years of pressure and demands from the International Monetary Fund to restructure Iraqi government banks, which hold most of the country’s deposits, to develop its banking system and enable it to enter the global banking market and make it more in line with the economy.

Government Bank Acquisition

The Prime Minister’s Advisor for Economic Affairs, Mazhar Mohammed Saleh, said in an interview with Shafaq News Agency that “the restructuring of banks came in accordance with the government’s program that outlined the features of comprehensive banking reform, as government banks, as they dominate 88% of the banking system’s investments, and the private banking system only has 12% of those investments. Therefore, the competitive foundations of the banking market are incomplete unless government banks are placed on the rules of market work in terms of efficiency, administrative governance, and the development of compliance levels similar to global banking,” noting that “the reform will include private banks with the same standards.”

He added that “the basics of reform in private banks are viewed from the perspective of what is called financial depth, one of the most important indicators of which is (the ratio of cash credit granted to total deposits in private banks), but in contrast we find that the market share of no more than 63 private banks still does not exceed 15% of those credit and creative operations, compared to the government banking system’s acquisition of 85% of credit activity, deposits and banking investment operations, which indicates dominance with its assets or assets over the total assets of the banking system.”

He pointed out that “it is time to reform the banking sector, both governmental and private, in a way that achieves homogeneity, unity and high competitiveness in the banking market, in addition to its governance and digital integration with the global banking market. This is what the banking reform policy that the government is currently adopting is working on, in coordination with stakeholders included in the reform steps and its current program in the governmental and private banking sector.”

The process of studying the restructuring of Iraqi banks began after Prime Minister Mohammed Shia Al-Sudani met with a delegation from the global company Ernst & Young, where he directed on 1/27/2023 to implement a plan to develop the performance of Rafidain Bank for an eight-month period, through the global company.

Difficulty of the structuring process

The former director of the Central Bank of Iraq, Mahmoud Dagher, said in an interview with Shafaq News Agency, “The government banks and the process of restructuring and developing them and making them consistent with modern banking work is very difficult for several reasons, including that these banks have become a treasury for distributing salaries to government employees more than they are banks for carrying out banking operations.”

He added that the other reasons are that the technical level in these banks is almost non-existent. In fact, these banks, especially Rafidain and Rashid Banks, would not have been able to accomplish any work without the electronic payment companies that support them. Therefore, they would not work without these companies. In addition, the huge number of their branches and the large number of employees in them makes it difficult to change the reality of these banks.

He pointed out that “there are international sanctions and decisions by courts abroad, proving the indebtedness of some government banks that are not resolved, and this is the reason for imposing international isolation on them, and therefore they cannot deal internationally,” stressing that “it is absurd to spend huge sums of money that do not lead to decisive results, as all the costs spent on these banks will not lead to restructuring in order to coordinate the work of government banks, especially Rafidain and Rashid and some specialized public banks in a way that is parallel to the modernization and technological development work that took place in banks such as the Trade Bank of Iraq.”

The two government banks, Rafidain and Rashid, were subjected to international sanctions during the 1990s following Saddam Hussein’s invasion of Kuwait, and they are still imposed on international dealings with them, especially with regard to the issue of financial transfers.

old banking system

Economic expert Basem Jamil Antoine said in an interview with Shafaq News Agency that “government banks have been operating for a long time within an old banking system without modernization, and these banks must keep pace with international banks,” adding at the same time that “these banks are the safety valve.”

He added that “these banks still need to develop and eliminate administrative routine and have employees take training courses to keep pace with the developments that have occurred in global banks,” indicating that “banks are not cash stores, but rather they must provide advanced credit banking services.”

He stressed that “the idea of ​​restructuring banks has been on the table for twenty years, and ideas and studies have been presented in this regard, but they have not been adopted,” stressing that “the bank needs security and administrative stability and independence in its work.”

The Ministry of Finance owns six government banks: Rafidain Bank, Rashid Bank, Al-Nahrain Islamic Bank, Agricultural Bank, Industrial Bank, and Trade Bank of Iraq.

Rafidain Bank is an Iraqi government bank, established in Baghdad in 1941, as the first Iraqi commercial bank. It has 146 branches inside Iraq, and some other branches are spread outside it in Jordan, Egypt, the United Arab Emirates, Lebanon, Bahrain and Yemen.

Rashid Bank is an Iraqi government bank, established in Baghdad in 1988, as an Iraqi commercial bank, with 162 branches spread across Iraq.

Shafaq.com

Apple delegation suggests to Al-Sudani to register the company’s phones in Iraq

Prime Minister Mohammed Shia al-Sudani discussed, on Monday, with a delegation from the American company Apple, the digital transformation in Iraq.

A statement by Al-Sudani’s office received by Shafaq News Agency stated that “during the meeting, common topics were discussed, as the Prime Minister indicated that Iraq is witnessing transformations in the digital reality today, and spoke about the work of the Supreme Committee for Digital Transformation in Iraq headed by him, in addition to other committees working in the same field, and he also indicated that Iraq has transformed into a successful investment environment in which many major companies operate, which requires rapid digital keeping pace.”

Al-Sudani stressed the importance of working to raise the levels of digital and technological capabilities of young people, which would expand job and employment opportunities and work to implement government programs aimed at completing all transactions through an integrated digital environment.

For its part, the company’s delegation proposed working within the framework of contributing to developing the capabilities of young people, and caring for developers in the fields of technology in cooperation with universities, as well as registering phones entering Iraq in a way that makes them at competitive prices, and due to the importance of the company’s phone products, because they support digital transformations related to the economy and money, according to the statement.

Shafaq.com

Iraqi Parliament Postpones Approval of “Real Estate Return” Law to End of Week

Iraqi Parliament Postpones Approval of Real Estate Return Law to End of WeekShafaq News/ The Iraqi Parliament postponed, on Monday, the law of “returning properties” to their owners, especially in Kirkuk Governorate, until the last session to be held during the current week.

The MP for Kirkuk Governorate, Dilan Ghafour, told Shafaq News Agency, “The decision to postpone came after a number of observations and opinions were raised, and they will be discussed, agreed upon, and the law will be re-submitted for voting in the last session of this week.”

For his part, MP Arshad Al-Salihi revealed to the agency that the Turkmen and Kurdish blocs agreed to postpone the cancellation of the Revolutionary Command Council’s decisions related to lands until the end of the week as the last date, to reach an agreement on it within the next 72 hours.

Before that, an informed source reported that the head of the “We Build” coalition, “the head of the Supreme Committee for the Implementation of Article 140 of the Constitution,” Hadi al-Amiri, attended Parliament to study the possibility of approving the “Returning Properties to Their Owners” law or not.

The source told Shafaq News Agency, “The head of the Supreme Committee for the Implementation of Article 140 of the Constitution, Hadi Al-Amiri, has been present in the House of Representatives since 1 pm until now.”

He added that “Al-Amiri held a meeting immediately upon his arrival to the Council building in the Constitutional Hall with the Acting Speaker of the Council, the Second Deputy Speaker, and the heads of the political blocs, in the presence of members of the Parliamentary Committee and representatives of Kirkuk Governorate.”

According to the source, after the meeting ended, it was agreed not to talk to the media about what happened in the meeting, from the agreement regarding voting on the law to return properties to their owners, especially in Kirkuk Governorate.

The source pointed out that “another meeting was held after 3:30 pm today, in the office of the acting head of the council, Mohsen Al-Mandalawi, in order to reach an agreement on whether to pass the law or not,” without mentioning further details.

In the context, an official statement issued by the House of Representatives, received by the agency, explained that today’s meeting with Al-Ameri discussed the results of the work of the government committee, and the completed stages of implementing Article 140 in cooperation with the ministries and relevant authorities.

The statement quoted Al-Mandlawi as confirming that “Kirkuk Governorate enjoys a special status in the draft law to return properties to their owners included in some decisions of the dissolved Revolutionary Command Council, and that its stability requires maintaining cooperation between the three authorities, and taking into account the sensitivity of this file by the various political forces.”

The Iraqi parliament was scheduled to vote today, Monday, on a draft law regarding the disputed areas, especially Kirkuk, by “returning properties to their owners that are covered by some decisions of the dissolved Revolutionary Command Council.”

The session’s agenda also included the second reading of the draft law amending the Personal Status Law and the general amnesty.

Kurdish MPs and officials say that the draft law concerns properties that are to be returned to their original Kurdish and Turkmen owners, and that were confiscated under 8 decisions issued by the dissolved Revolutionary Command Council during the years from 1975 to 1979, and the aim of which was to carry out demographic changes in the disputed areas.

Shafaq.com

Iraqi exports decline by 15.7% in the first quarter of this year

Iraqi exports decline by 15.7 percent in the first quarter of this yearShafaq News/ The Central Bank of Iraq announced, on Monday, that Iraqi exports declined by 15.7% during the first quarter of this year.

The bank said in a report received by Shafaq News Agency, “Iraq’s commodity exports declined by 15.7% during the first quarter of this year to reach 23 billion and 474 million dollars, compared to 27 billion and 847 million dollars for the fourth quarter of last year.”

He added that “Iraqi oil exports constituted 96.7% of total commodity exports for the first quarter of this year, recording a decline of 16.4% compared to the last quarter of the previous year. This decline is attributed to a 10.7% decline in oil prices.”

He pointed out that “exports of petroleum products, including naphtha, diesel and other products, constituted 2.7% of total exports in the first quarter of this year.”

The bank indicated that “other commodity exports constituted a small percentage of 0.6% of total commodity exports, the largest portion of which focused on industrial equipment and some primary foods and beverages intended for family consumption.”

Shafaq.com