Who Is Running The Iraqi Economy? A Series Of Decisions Are Being Made, And The Market Is Paying The Price For The Lack Of Vision.
Last updated: September 22, 2026 In Iraq in recent weeks, questions have been escalating regarding the management of economic and monetary files, with a succession of decisions and measures affecting the banking sector, financial transfers, liquidity, the exchange market, and the movement of funds, at a time when an informed economic source believes that some of these decisions were taken amid the absence of an integrated economic vision or a sufficient explanation of their repercussions on the market.
The source told the Independent Press Agency that the problem, according to his assessment, went beyond the issue of disagreement with a particular economic decision, to the nature of managing the economic file itself, and whether the decisions issued by the government and the central bank come within a coherent roadmap, or are separate measures taken under the pressure of developments and crises, and then their results are dealt with later.
He added that “the Iraqi market is now in a state of almost constant anticipation of the next decision,” considering that decisions that affect the movement of the dollar, transfers, cards, banks and liquidity cannot be treated as limited administrative instructions, because they are directly related to the interests of millions of citizens, merchants, companies and depositors.
According to the source, a number of economic measures during the past period were preceded by media talks and leaks, before moving to more serious stages or to implementation, which he considered an indicator that raises questions about the nature of decision-making and the mechanism for announcing it, especially since the markets are very sensitive to news related to the dollar, banks and liquidity.
He said that “when an economic decision is circulated in the market before its details are officially clarified, speculation begins on it before its implementation begins,” noting that merely talking about new restrictions or instructions may prompt traders and citizens to change their financial behavior, whether by increasing demand for the dollar, withdrawing funds, postponing transfers, or raising prices in anticipation of any possible development.
The source believes that one of the main problems lies in the lack of a detailed economic explanation accompanying some decisions, as the measure is often announced while the citizen and the merchant are left with questions about the reason for its issuance, its duration, its ultimate goal, and whether it is a temporary measure or part of a long-term policy.
These criticisms come at a time of significant transformation in the Iraqi banking system. Since 2025, the Central Bank has been implementing a comprehensive program to reform private, commercial, and Islamic banks, as well as branches of foreign banks.
This program requires banks to choose between options such as remaining in the market, merging, or exiting, while adhering to new standards related to governance, compliance, management, and risk.
In February 2026, the Central Bank announced that Iraqi banks had completed the phase of selecting these options, paving the way for an assessment of their compliance with the reform requirements.
The Central Bank presents these steps as part of a broad restructuring process for the banking sector and to enhance its ability to integrate into the global financial system, stressing that the new phase aims to strengthen governance, transparency, compliance and develop the institutional performance of banks.
However, the source believes that the scale of these transformations makes the need for calmer and clearer management even greater, because restructuring an entire banking sector has effects that are not limited to bank boards of directors, but extend to deposits, transfers, credit, trade finance, and the citizen’s confidence in the banking system.
He explained that while any broad regulatory measure may be technically necessary, the method of its implementation, its timing, and the management of its repercussions on liquidity and depositors are no less important than the decision itself.
The developments at Al-Taif Islamic Bank during September highlight the sensitivity of the banking sector. On September 8th, the Central Bank of Iraq affirmed that the rights of the bank’s depositors were protected, explaining that placing it under receivership was a precautionary supervisory measure. The bank stated it was working to enhance liquidity, regulate withdrawals, and gradually fulfill obligations, prioritizing salaries deposited with it.
The source says that such cases should prompt economic institutions to treat the element of “trust” as an essential part of financial security, because news related to a bank, liquidity, or deposits can quickly have a psychological impact on other banks, even if they are not facing the same problem.
He added that the banking system does not operate on numbers alone, but also on trust, and that any shake-up in depositors’ confidence could lead to an increase in demand for cash and a move away from bank deposits, which contradicts the state’s stated goal of increasing financial inclusion and reducing reliance on cash.
Regarding liquidity, IMF reports reveal that the issue is more profound than a mere temporary shortage or surplus of cash. In its report on Iraq, the IMF noted persistently high levels of excess liquidity within the banking system, explaining that this limits the ability of monetary policy to effectively influence interest rates and credit, and calling for improved liquidity management and enhanced coordination between fiscal and monetary policy.
Here, according to the source, an important paradox emerges: there may be high liquidity at the level of the financial system as a whole, while parts of the market, some banks, or government entities face various difficulties in providing cash or managing financial flows at specific times.
He says that this difference is not adequately explained to the public, which sometimes leads to the term “liquidity” being used in a simplified way, even though liquidity in the central bank differs from the liquidity of the Ministry of Finance, and the liquidity of banks differs from the amount of cash in circulation in the hands of the public.
The IMF also noted in its assessment that the effectiveness of Iraqi monetary policy remains limited due to the weak transmission of central bank decisions to lending and deposit rates, as well as the heavy reliance on the public sector and the nature of the domestic financial system.
The source believes that this picture reveals that the crisis is not due to a single decision, but rather to an economic structure that requires higher coordination between the government, the Ministry of Finance, the Central Bank, banks, and regulatory bodies.
In another context, the Central Bank affirms that it possesses sufficient foreign reserves to meet legitimate demand for foreign currency, finance foreign trade, settle bank card payments, and process travelers’ requests at the official exchange rate. In a statement issued on September 19, 2026, the Central Bank attributed the rise in the dollar’s price on the local market to speculation, market expectations, and the exploitation of geopolitical circumstances, while emphasizing the continued financing of trade through established channels.
However, the source says that having high reserves alone does not prevent disruptions in the parallel market if citizens or traders face difficulty accessing dollars at the official rate or if restrictions and procedures related to obtaining them increase.
He adds that the difference between the official price and the parallel market in this case becomes an indicator not necessarily of a shortage of reserves, but rather of a gap between the real demand for currency and the ability of official channels to meet it easily and quickly.
The IMF takes a somewhat similar approach, noting in its assessment that simplifying access to foreign currency, improving customs controls, and encouraging the use of the dinar in some transactions are factors that can help reduce the gap between the official and parallel exchange rates.
The source says that addressing the exchange rate cannot rely solely on security or regulatory measures, because the demand for dollars also stems from the structure of the Iraqi economy, which is largely based on imports, and therefore any restrictions on access to foreign currency could quickly translate into commodity prices.
He added: “If the trader imports in dollars, any increase in the cost of accessing dollars will ultimately be passed on to the consumer.”
In contrast, the Central Bank points to the transfer of foreign trade financing to commercial banks and their relationships with correspondent banks, a step that the IMF considered an important development in modernizing the Iraqi financial system.
The Central Bank also announced in July 2026 that it had reached understandings allowing a number of restricted Iraqi banks to return to foreign correspondent channels in currencies other than the dollar after they met the requirements for compliance, governance and reform.
The source considers these measures to represent a fundamental shift in the Iraqi financial structure, but they require a clear transition period, because transferring the transfer system from one system to another and subjecting banks to stricter standards may lead to temporary pressures on some institutions and customers.
He argues that the problem begins when reforms that are theoretically correct are implemented without providing sufficient alternative pathways for the market during the transition period.
He adds that “reform is not measured by the strength of the decision, but rather by the economy’s ability to withstand the decision.”
This issue is all the more important given Iraq’s heavy reliance on oil revenues. In a technical report issued in July 2026, the IMF indicated that the Iraqi economy faces medium-term risks related to volatile oil prices, high debt levels, and regional instability, emphasizing the importance of strengthening coordination between fiscal and monetary policies and implementing financial sector reforms.
The IMF also expects, based on its current data for Iraq, that real GDP will contract by 6.8% during 2026, with an expected inflation rate of around 3%.
The source says these indicators make the margin of error in economic decision-making narrower, because an economy that is heavily dependent on oil and affected by government spending, energy prices and regional tensions needs careful management of shocks.
He believes that the government and the central bank should move from a policy of “managing the problem after it happens” to a policy of anticipating crises before they occur.
He added that what is needed is a clear model that answers, before any decision is issued, a set of basic questions: What will happen to the dollar exchange rate? What will happen to liquidity? What will happen to banks? What will happen to traders? And how will the decision affect the prices of goods and the citizen?
The source believes that these questions are not adequately addressed in the official discourse accompanying the decisions.
The issue of coordination between the government’s fiscal policy and the central bank’s monetary policy also stands out, a point repeatedly emphasized by the IMF, particularly with regard to liquidity management, government spending, deficit financing and price stability.
The source says the central bank can use its monetary tools, but it cannot single-handedly address the imbalances resulting from government spending, weak non-oil revenues, a high payroll, or weak domestic production.
Conversely, the government cannot manage economic policy in isolation from the impact of its decisions on liquidity, the exchange rate, and the central bank’s reserves.
Hence, the source believes that the real problem is not the multiplicity of institutions, but rather the extent to which there is an “economic command room” capable of unifying decisions and setting priorities.
Regarding the state-owned banks, the IMF indicated that reforming Rafidain and Rasheed banks remains a key issue, with the need to address non-performing loans, capital shortages, governance, and digital infrastructure.
The source believes that any reform of the private banking sector will not achieve its full results if the state-owned banks, which dominate a large part of financial activity, remain in need of deep restructuring.
He says that the private banking sector today faces compliance, oversight, merger, or exit requirements, while reforming the state banking structure remains a parallel challenge that cannot be ignored.
The source asks: “Is the goal to actually build a competitive banking system, or just to rearrange the names of existing banks?”
In his view, true reform should be reflected in the citizen’s ability to easily open an account, transfer funds, obtain credit, use his card locally and internationally, and feel secure when depositing his money.
If restrictions increase, procedures become more complicated, and access to funds decreases, citizens may revert to keeping cash outside the banking system, which is the opposite of what the state is trying to achieve.
The source also warns of the impact of repeated decisions on the private sector, explaining that investors need a predictable environment, and that any continuous change in banking, tax, customs or transfer instructions makes calculating future costs more difficult.
He says that capital “fears uncertainty more than it fears difficult decisions,” because an investor can adapt to strict rules if they are clear and stable, but finds it difficult to operate when the rules change frequently.
He points out that economic reform also requires greater transparency in data dissemination, not just advertising.
The source suggests that major economic decisions should be accompanied by an “economic impact paper” that explains to citizens and markets the reasons for the decision, its objective, the expected timeframe for its implementation, the sectors that will be affected by it, and the results that the government or the central bank will consider as a benchmark for its success.
It also calls for the publication of a subsequent evaluation of each decision to see whether the actual results matched expectations.
He adds: “If the results of the decision are not measured, how can we know that it was successful?”
At the same time, it cannot be ignored that the Central Bank operates within a complex financial environment related to international compliance, anti-money laundering and counter-terrorism financing, and the relationships of Iraqi banks with correspondent banks around the world.
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The Central Bank has confirmed that its reforms aim to reintegrate Iraqi banks into the international financial system and develop their ability to carry out cross-border transfers in multiple currencies.
But the source believes that the challenge is not choosing between “reform” and “not reforming,” but rather between organized and well-thought-out reform and reform that may have a high transitional cost if it is not managed properly.
To consider any objection to the implementation mechanism as a rejection of reform as an oversimplification of the problem, because the market and the citizen have the right to know the cost of the reform, its timetable and the expected results from it.
In conclusion, recent developments reveal that Iraq is facing a sensitive economic phase in which the issues of banking reform, liquidity, the dollar, government spending, dependence on oil, and international financial relations are intertwined.
While official institutions assert that the current measures aim to build a more efficient, transparent banking sector capable of integrating into the global financial system, critics argue that the speed of the transformations and the multiplicity of decisions require a higher level of coordination, explanation, and transparency.
The question posed by the source remains: Who has a complete economic vision for Iraq?
Is there a clear plan linking the decisions of the Central Bank with those of the Ministry of Finance, the government, trade, customs, and banks, or does each institution operate within its own sphere of influence, and then the market is later asked to bear the consequences?
The source concludes by saying that Iraq does not need more decisions as much as it needs “one comprehensive economic decision in one direction,” because the economy is not managed by experimentation, and the citizen, the merchant, and the bank should not be a testing ground for policies.
Ultimately, the decision can be amended, and new instructions can be issued, but trust, once damaged, is much more difficult to restore.
The question that will remain for the government and the central bank during the next stage is: Are the decisions driven by a clear economic vision, or are the decisions driven by crises
