Central Bank of Iraq: We are studying removing zeros from the dinar and there are no restrictions on our balances in America

Shafaq News / The Central Bank of Iraq reduced, on Sunday, its reliance on the US dollar in commercial transactions, adding that the project to remove zeros in Iraq is under continuous review and study.

Countries remove zeros from their currency to revalue their national currency and simplify financial transactions. This is done by removing a specific number of zeros from the nominal value of the currency, making it appear less inflationary and more stable.

In this context, the Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, confirmed that the Central Bank responded to global economic challenges such as rising energy and raw material prices, by amending some monetary policies in line with the international situation and to enhance confidence in the Iraqi dinar and prevent a sharp decline in its value.

Al-Alaq added that the Central Bank of Iraq increased its holdings of foreign exchange and gold reserves to enhance the country’s financial position and stability, in order to enhance its ability to confront potential economic crises.

Shafaq.com

We are constantly reviewing the deletion of zeros from the dinar, and there are no restrictions on our balances in America

Baghdad – The Central Bank of Iraq has reduced reliance on the US dollar in commercial transactions, according to the Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, adding that the project to remove zeros in Iraq is subject to continuous review and study at the bank.

Countries remove zeros from their currency to revalue their national currency and simplify financial transactions. This is done by removing a specific number of zeros from the nominal value of the currency, making it appear less inflationary and more stable.

Al-Alaq confirmed, in an extensive interview with Al Jazeera Net, that the Central Bank responded to global economic challenges, such as rising energy and raw material prices, by amending some monetary policies in line with the international situation and to enhance confidence in the Iraqi dinar and prevent a sharp decline in its value.

He also stressed that the Central Bank of Iraq increased its holdings of foreign exchange and gold reserves to strengthen the country’s financial position and financial stability in order to enhance its ability to confront potential economic crises. These are the details of the dialogue:

What steps have you taken to address the crisis of the dollar’s ​​rise against the Iraqi dinar and reduce the gap between the official price and the black market price?

The Central Bank of Iraq has created new mechanisms to cover the accounts of local banks with their senders in other currencies (Chinese yuan, Indian rupee, euro and UAE dirham) in addition to the dollar, which has reduced reliance on the US currency in commercial transactions for the clients of these banks, as the Central Bank seeks to withdraw excess liquidity in the economy that puts pressure on the exchange rate and to prevent the exported currency from growing in an undesirable manner.

What is the status of the country’s foreign reserves?

Foreign exchange reserves are the tool used by all central banks to maintain the stability of the local currency exchange rate against foreign currencies, as well as to reduce exposure to external crises by maintaining liquidity in foreign currency to absorb shocks in times of crisis.

The Central Bank of Iraq has a level of reserves that enables it to achieve this stability and provides it with sufficient flexibility to meet the demand for foreign currencies to meet the requirements of the balance of payments and other obligations.

According to the latest data on the level of foreign reserves adequacy, the foreign reserves of the Central Bank of Iraq cover 83.62% of the broad money supply, i.e. covering the cost of importing 15 months, while the global standard rate is 20%, covering 6 months of importing.

However, foreign reserves management faces global and local challenges according to the economic nature of each country and the economic and geopolitical conditions it is going through.

Aljazeera.net

Kurdistan deposits about 100 billion dinars of non-oil revenues into the Iraqi state treasury

Shafaq News / The Ministry of Finance and Economy in the Kurdistan Region announced on Sunday the deposit of an amount of money amounting to about 100 billion dinars in financial revenues for non-oil revenues for last May.

The ministry said in a statement today that it deposited an amount of 91 billion, 151 million, and 784 thousand Iraqi dinars to the federal government as the federal treasury’s share of the non-oil revenues of the Kurdistan Region for the month of May of this year.

Shafaq.com

Politico: US troop withdrawal to be announced next week

Information / Translation… The American newspaper Politico revealed, quoting two American officials in the Biden administration, that the United States expects to announce next week a long-awaited agreement with Iraq regarding reducing the American military presence in the country.

The report, translated by Al-Maalomah Agency, quoted the officials as saying that “negotiations over the plan, which Iraqi officials have publicly said will lead to the departure of 2,500 American troops in Iraq by the end of 2026, are in their final stages,” but they claimed that the fight against ISIS remnants in Iraq and Syria is not over yet.

The report added that “the upcoming announcement, which is expected to come after US and Iraqi officials meet again at the UN General Assembly meeting in New York next week, is part of the Biden team’s efforts to assess long-term US commitments abroad before President Joe Biden leaves office in January.”

The report indicated that, “However, the announcement of the withdrawal plan caused panic in Congress, as House Armed Services Chairman Mike Rogers (R-Ala.) expressed his frustration with what he heard from the Pentagon regarding the deal.”

“There appears to be no strategic military advantage to this anticipated decision,” Rogers wrote on social media. “Withdrawing from Iraq in this manner would benefit and embolden our enemies, and I am deeply concerned about the implications such a decision could have on our national security.”

For his part, Iraqi Prime Minister Mohammed Shia al-Sudani said this week that “justifications no longer exist” for a large American presence in his country. “There is no need for an alliance and we have moved from wars to stability and ISIS does not represent a real challenge.”

Almaalomah.me

Al-Sudani’s advisor: The banking system in Iraq is rentier par excellence

Shafaq News / Mazhar Mohammed Saleh, economic affairs advisor to Prime Minister Mohammed Shia al-Sudani, described the banking system in Iraq as rentier par excellence on Saturday, noting that this requires a comprehensive reform process.

Saleh told Shafaq News Agency, “The banking system in Iraq is rentier par excellence, regardless of ownership,” noting that it “lives on oil resources and government liquidity directly and indirectly.”

He added that “the banking system derives its activities from government spending, which means that it is a market that lacks banking independence and the movement of desired savings in society from the forces of financial surplus towards desired investments to generate high financing for growth and sustainable development.”

Saleh stressed that “this requires a comprehensive reform process to create market institutions,” indicating that “this enables the banking market to be integrated with the international financial and banking system and become attractive to global banks on a large scale.”

Last Thursday, Prime Minister Mohammed Shia al-Sudani announced 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.

Shafaq.com

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.”

Almaalomah.me

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.”

Almaalomah.me

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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