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Iraq Business
21 hours ago
- Business
- Iraq Business
Iraqi Dinar Q&A: RV Prospects Two Weeks on from Airstrikes on Iran
By Guest Blogger. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News. Q: Following your recent article on the Dinar Revaluation (RV) and Israeli Airstrikes on Iran, the situation in the region has progressed. What is your current assessment as it relates to the dinar (IQD)? A: It has now been two weeks since the initial Israeli airstrikes on Iran, and the situation has continued to evolve. While a US-brokered ceasefire was announced on 23rd June, following a 12-day conflict that saw exchanges of missile and drone attacks, the broader implications for Iraq and the Iraqi Dinar's potential revaluation remain complex and largely negative. Here's a follow-up based on the latest developments: Lingering Instability and Uncertainty Despite the ceasefire, the underlying tensions between Israel and Iran persist, and this continued regional instability is a significant factor for Iraq. While Iraq itself largely avoided direct involvement in the recent fighting, its geographic proximity means it remains highly susceptible to any fallout. Political and Security Concerns: The conflict highlighted the potential for regional power struggles to spill into Iraq, impacting its already fragile domestic stability. There have been reports of continued efforts to manage the influence of Iran-aligned Iraqi groups, and the risk of renewed hostilities involving these groups remains. The conflict highlighted the potential for regional power struggles to spill into Iraq, impacting its already fragile domestic stability. There have been reports of continued efforts to manage the influence of Iran-aligned Iraqi groups, and the risk of renewed hostilities involving these groups remains. Economic Vulnerability: Iraq's economy, heavily reliant on oil exports, is particularly vulnerable. While there was a short-term rise in oil prices during the conflict, which generated some additional revenue, this was largely offset by increased import costs due to disruptions in maritime insurance markets, global price fluctuations, higher shipping expenses, and a decline in air transport and religious tourism. An Iraqi government adviser described the conflict's impact as a "double-edged shock," leaving the Iraqi economy in a state of "neutral uncertainty." Dinar Under Pressure The Iraqi Dinar has continued to face headwinds, largely due to the pervasive uncertainty and ongoing economic challenges. Dollarisation and Parallel Market: The increased regional tension has reinforced the demand for the US dollar as a safe haven. While the official Central Bank of Iraq (CBI) rate remains stable at 1,320 IQD to $1, the parallel market has seen fluctuations. Recent reports indicate that USD/IQD exchange rates have edged lower in Baghdad and Erbil, with selling prices for $100 ranging from 141,750 IQD to 142,250 IQD, still significantly above the official rate. This persistent gap is a clear indicator of market pressure and a lack of confidence in the Dinar. The increased regional tension has reinforced the demand for the US dollar as a safe haven. While the official Central Bank of Iraq (CBI) rate remains stable at 1,320 IQD to $1, the parallel market has seen fluctuations. Recent reports indicate that USD/IQD exchange rates have edged lower in Baghdad and Erbil, with selling prices for $100 ranging from 141,750 IQD to 142,250 IQD, still significantly above the official rate. This persistent gap is a clear indicator of market pressure and a lack of confidence in the Dinar. Smuggling Concerns: The issue of dollar smuggling to Iran, aimed at circumventing US sanctions, continues to plague Iraq's financial system. This illicit flow of currency further limits the CBI's ability to effectively manage the Dinar's value and build confidence for a revaluation. The issue of dollar smuggling to Iran, aimed at circumventing US sanctions, continues to plague Iraq's financial system. This illicit flow of currency further limits the CBI's ability to effectively manage the Dinar's value and build confidence for a revaluation. Budgetary Challenges: Iraq is facing significant fiscal strains, with the 2025 federal budget unlikely to be submitted to Parliament anytime soon. This delay is attributed to "severe financial deficits, unstable revenue streams, the absence of a coherent economic vision, and the looming legislative elections." A parliamentary finance committee member noted a budget deficit of nearly 80 trillion IQD (approximately $61 billion), which puts immense pressure on government spending and the overall economic outlook. Delays in the budget can directly impact public salaries and infrastructure projects, further dampening economic sentiment. Outlook for Revaluation Given these ongoing developments, the prospect of an Iraqi Dinar revaluation in the near future appears highly improbable. The confluence of factors including: Continued regional instability and potential for escalation. Persistent demand for the US dollar and challenges in the parallel market. Ongoing issues with dollar smuggling and US sanctions. Significant internal budgetary deficits and political uncertainty within Iraq. all contribute to an environment that is not conducive to a revaluation. While Iraq's vast oil reserves are a long-term asset, the immediate economic and geopolitical landscape presents too many hurdles. The Iraqi government's focus is currently on managing the existing economic challenges and navigating the complex regional dynamics, rather than pursuing a revaluation. For more information on the Iraqi dinar, check out IBN's Dinar Page here:
Iraq Business
2 days ago
- Business
- Iraq Business
IMF: Iraq should Simplify Access to Foreign Exchange
By John Lee. The Central Bank of Iraq (CBI) has issued a press release claiming extensive praise from an International Monetary Fund (IMF) mission, led by Jean-Guillaume Poulain, following meetings from 4th to 13th of May, 2025. The CBI statement, widely reported in local and international press, cites the post-meeting report from the IMF, which Iraq Business News publicised here. The report takes a more nuanced view of achievements to date. It does, however, commend the CBI for the successful transition to the new trade finance system, saying: " Trade finance is now fully processed by commercial banks through their correspondent banking relationships. "This has also supported the recent decline in the spread between the official and parallel market exchange rates. "Nonetheless, further efforts are needed to further reduce the spread, including by imposing Iraqi dinar usage for car and real estate transactions, improving customs controls to curb smuggling, and simplifying FX access. " Original report from IMF. Press release from CBI. [Arabic] (Sources: CBI, IMF)
Iraq Business
3 days ago
- Business
- Iraq Business
CBI Launches Programme to Boost Youth Entrepreneurship
By John Lee. The Central Bank of Iraq (CBI) has launched the "Knights" [Al Fursan] programme, a locally-developed initiative aimed at fostering youth entrepreneurship and supporting the private sector's role in national economic development. The launch event, held at the CBI's headquarters on 25 June 2025, was attended by Governor Ali Mohsen Al-Allaq, who emphasised the Bank's commitment to empowering young entrepreneurs and contributing to Iraq's GDP growth through innovative projects. Al-Allaq noted that recent reforms in Iraq's banking sector now enable greater support for income-generating small and medium-sized enterprises (SMEs), which are vital to sustainable private sector development. The "Knights" programme provides: Access to real investment opportunities for young entrepreneurs; Eligibility-based access to soft loans; A support framework to ensure the sustainability of promising ventures and prevent project failure. During the event, a group of young participants showcased their projects, demonstrating an understanding of market demand and available resources. The programme is expected to attract more entrepreneurs in the future and generate new employment opportunities. (Source: Central Bank of Iraq)
Shafaq News
21-06-2025
- Business
- Shafaq News
Iraq's fragile economy reels under Israeli-Iranian conflict
Shafaq News/ Iraq is showing clear signs of economic stagnation following the eruption of conflict between Iran and Israel. Citizens are reducing spending, hoarding cash, and losing trust in the local currency. According to economists and ordinary Iraqis interviewed by Shafaq News, the downturn is visible in Iraq's cooperative markets and hypermarkets, which are experiencing a steep drop in customer numbers. These retail spaces are now struggling with rising prices and weakened purchasing power. Economist Ali Dadoosh described the crisis as a complex case of "compound stagflation," explaining to Shafaq News that this situation is characterized by increased government cash spending, such as employee compensation, against a backdrop of weak actual consumer activity due to uncertainty and eroding confidence in the national currency. "Lack of trust in the dinar is redirecting funds toward dollar speculation instead of investment or consumption," Dadoosh added. "This feeds the exchange rate crisis and drives up the cost of imported goods." He provided a concrete example that employee compensation rose from 13.3 trillion dinars (~9.05B USD) in Q1 2024 to 15.3 trillion dinars (~10.4B USD) in Q1 2025, which theoretically indicates increased movement in the real and monetary markets. However, "we are seeing weak purchasing activity in small and large outlets like hypermarkets and local shops." Iran is a key supplier of non-oil goods to Iraq, with annual imports estimated at $20 billion. But over the past two months, Iranian exports to Iraq have fallen to just $1.5 billion, according to Iranian customs data. This drop suggests that continued warfare will disrupt Iraq's trade balance and economic stability even further. The root of this, Dadoosh said, lies in deep recession, uncertainty, and fear of what lies ahead due to the ongoing war between Iran and Israel. He also warned that this behavior would lead the Central Bank of Iraq to increase currency issuance, further undermining confidence in the dinar. "This shift toward the parallel dollar market will raise the exchange rate and, in turn, the price of goods and services, deepening the crisis." Dadoosh proposed a set of short-term solutions, including controlling excess liquidity using flexible monetary tools, such as open market operations to reduce surplus dinar liquidity that is going into dollar speculation. Also, reactivating short-term deposit certificates (CDs) with attractive interest rates for banks and citizens, "would help absorb cash outside the banking sector." "We should stimulate local demand intelligently by issuing temporary purchase vouchers or offering direct support to low-income groups, redeemable only in local or cooperative markets." He also considers temporary tax exemptions or deferments for small shops to encourage price reductions and stabilize markets. Sense Of Financial Instability Economist Ahmed Eid told Shafaq News that a "sense of financial instability" is now widespread among broad segments of society amid worsening economic crises and declining purchasing power. "Continuous price increases and currency volatility are rooted in weak financial and monetary policies," he said. "These factors have eroded salaries and pushed households to adopt a 'defensive consumption' model: minimizing spending and saving in anticipation of emergencies caused by regional instability." Eid emphasized that this behavioral shift doesn't just reflect economic fragility, but also contributes to market stagnation and weakens the economic cycle, which relies heavily on consumption. "With no clear economic vision, limited investment, and stagnant income levels, there's now a significant gap between what people earn and what they need to live." Eid called for serious, realistic measures that begin by ensuring income stability for citizens and enhancing market oversight to prevent price manipulation. "We also need to expand social protection and launch a package of economic reforms to restore trust between the state and its citizens." The stagnation is confirmed by official figures. Cooperative hypermarkets initially recorded sales of around 700 million dinars (~476,000 USD) per branch during their first few months of operation, according to the Ministry of Trade. While no recent sales data has been published, the sharp decline in foot traffic indicates falling revenue. Fatima Abdul-Hussein, 35, said, "My monthly salary no longer covers my family's needs as it used to. Even with my husband's income, we can only afford essential goods because of rising food prices like meat and fruit." Riah al-Hassani echoed the sentiment, "Public sector salaries aren't enough to meet household needs anymore because of inflation and market instability." He added, "Many products that saw price spikes during the initial crisis have not decreased. Instead, prices continued to climb, which has a negative impact on the financial stability of many Iraqi families." "I bought items from a store at one price, only to find the same items more expensive just days later in the same shop. This price instability is alarming," Luhayyib Abdul-Ghani shared a personal experience. Although the Ministry of Trade insists it holds sufficient reserves of essential goods and is ready to meet demand across all provinces—including the Kurdistan Region—many Iraqis remain unconvinced. "The Ministry says it can handle any global crisis and that delays in ration distribution are due to inspection processes," said one citizen. "But with war ongoing and fears of wider conflict, people are cutting back on spending to prepare for the worst." Abdul-Karim al-Zamili, 45, expressed deep concern, "If this war escalates, the economic consequences for the entire region will be severe. Iraq will be one of the hardest-hit countries. Families are already reducing spending." "No one can predict what might happen," he said. "Anxiety and fear are making us save every dinar and spend only on necessities." For now, while the Israeli-Iranian war has not physically reached Iraq, its economic shockwaves are already being felt—in markets, in households, and in a growing sense of fear that hangs over the country's financial future.
Iraq Business
18-06-2025
- Business
- Iraq Business
CBI holds Workshop on Money Laundering
By John Lee. The Erbil branch of the Central Bank of Iraq (CBI) held a training workshop on " National and Sectoral Risk Assessment Procedures " in collaboration with the CBI's Banking Studies Centre and the Office of the Compliance Monitor. The event brought together representatives from private banks, non-banking financial institutions, and electronic payment companies operating in the Kurdistan Region. Key topics included Anti-Money Laundering and Counter-Terrorism Financing Law No. 39 of 2015, Financial Action Task Force (FATF) recommendations, and the national risk assessment of money laundering and terrorism financing based on international standards. The workshop emphasised practical applications, operational risk assessment, and real-world case studies aimed at enhancing participants' analytical capabilities. Lecturers highlighted the importance of updated compliance policies and effective inter-unit cooperation to foster a resilient banking environment aligned with global standards and the CBI's strategic vision. The workshop is part of the Banking Studies Centre's and Compliance Office's joint effort to develop a skilled generation of banking professionals capable of navigating modern regulatory challenges and embedding a culture of compliance as a cornerstone of sound banking governance. (Source: Central Bank of Iraq)
