Iraq Economic News and Points To Ponder Sunday Morning 7-27-25

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The Dinar Is Recovering. Four Painful Blows To The Parallel Dollar Reveal The Successes Of The Iraqi Economic Program.

July 26, 2025  Baghdad / Iraq Observer 
 
The US dollar in Iraq is witnessing significant  and sustained decline against the national dinar, following a significant period of fluctuation far from the official exchange rate.  This was not arbitrary,  but rather the result of a comprehensive economic policy pursued by the Iraqi government as part of a reform vision it envisioned within its program.  Amid escalating debate over the stability of the Iraqi market and the varying indicators associated with the dollar exchange rate, the  Prime Minister’s financial advisor, Mazhar Mohammed Salih,  issued detailed statements revealing the reasons for the continued decline in the value of the dollar on the parallel market,  compared to a significant rise in the strength of the Iraqi dinar.

He also emphasized that this  shift was not a coincidence,  but rather the direct result of a series of coordinated government measures across  monetary, fiscal, and  trade policies implemented over the past two years.
 
*4 main reasons 
 
Saleh attributed the decline in the dollar exchange rate on the parallel market,
     which is now approaching the official rate, to four main reasons. Speaking to Iraq Observer, he said,
 
“The first factor is the  strict legal ban on dollar trading in domestic transactions, particularly in the real estate market, which is   one of the largest and strongest financial markets in the country.
 
This has reduced the scope for informal foreign currency trading.”  He added that the second reason relates to “the shift in monetary policy toward direct foreign exchange support via international banks that correspond with national banks for external transfer purposes,
 
     in contrast to the discontinuation of the Central Bank’s currency selling window at the beginning of this year.” He noted that “this policy has limited  reliance on the parallel market and the  risks of unsafe and high-cost financing.”  

Observers describe this step as “not just a technical choice,
but rather a comprehensive strategy to connect Iraqi banks to the international financial system without the need for dubious or unclearly compliant local channels.
 
Thus, the map of foreign transfers was redrawn to be conducted legally and regulated,  gradually reducing the influence of the parallel market and currency exchange companies, which had previously  acted as intermediaries between importers and exporters and  set prices as they pleased.”
 
* Liberalization of small importers 
 
The third reason, according to the government advisor, relates to  “small importers’ access to the official foreign currency financing network  without the need for intermediaries from money transfer companies.
 
This has  enabled them to import at a fixed, official exchange rate and has contributed to   reducing costs and  enhancing compliance, especially since   this segment represents approximately 60% of the volume of foreign trade.”

He emphasized that “this facilitation came about thanks to government measures that reduced administrative bureaucracy.”  With this opening,  exchange rates for these traders became fixed at the official rate (1,320 dinars to the dollar), which  caused the parallel market to lose a large segment of its customers,  who had been the primary fuel for the increased demand for dollars outside of official channels.  

He pointed out that the * Payment cards… another reason
 
fourth factor is the “expansion of the culture of using foreign currency electronic payment cards among travelers over the past two years,   rather than putting pressure on the cash dollar market, in addition to the availability of cash dollars to travelers at airports through national banks,   subject to flexible and highly compliant regulatory controls.”
 
In the past, travelers preferred to carry large amounts of dollars in cash,   creating additional demand for hard currency in the local market,   especially during travel, tourism, or study seasons.

Consequently, the  switch to bank cards has contributed to  market stability and  reduced speculation. Saleh concluded his remarks by emphasizing that “the price defense policy adopted by the state, through the  establishment of cooperatives for consumer goods and the  construction basket funded at the official exchange rate of 1,320 dinars to the dollar, represents an integral part of the success of economic policy in Iraq,  through the harmonization of  monetary, financial, and   commercial efforts within the government program.”
 
With the  continued flow of dollars into official channels, the expansion of financial oversight tools, and the  promotion of a culture of electronic payments,  the Iraqi dinar is now gradually approaching the rate officially set by the Central Bank of Iraq.
 
* Government efforts…the decisive role 
 
For his part, economic expert Safwan Qusay says that the dinar’s appreciation against the dollar comes against the backdrop of the  Central Bank of Iraq‘s reserves rising to more than $97 billion, in addition to  gold reserves exceeding 132 tons.
 
This boosts  confidence in the Iraqi economy and  provides significant support to the value of the local currency.  In an interview with Iraq Observer, the economic expert emphasized the  positive outlook for increasing non-oil revenues and the  government’s ongoing efforts to  halt gas  flaring and develop energy and development projects.  

He noted that adjusting the public spending structure toward sustainability plays a crucial role in achieving economic and financial stability.  

According to Qusay, maintaining and developing positive relations with the United States and the Gulf states could significantly boost the value of the Iraqi dinar,
especially following US President Donald Trump’s speech encouraging support for US exports to Iraq.
 
Qusay emphasized that the  exit of Syria and Lebanon from the risk zone directly contributed to supporting financial stability in Iraq,  which positively impacted the dinar exchange rate.    https://observeriraq.net/الدينار-يستعيد-عافيته-أربع-ضربات-موجع/

Secret Meeting In Istanbul: Washington Threatens New Financial Sanctions On Iraq
 
July 25, 2025 Last updated: July 25, 2025  Al-Mustaqilla/- An informed source revealed to Al-Mustaqilla that  an unannounced meeting was held in Istanbul in recent days, bringing together the  Assistant Chairman of the US Federal Reserve and a  high-ranking delegation from the Central Bank of Iraq.

The source stated that the meeting came at the urgent invitation of the US to discuss critical developments in the file of financial transfers and   Iraqi banking transactions. According to the source,
 
the US side informed the Iraqi delegation that new financial sanctions are under preparation,  to be imposed on a number of Iraqi banks and financial institutions,  due to what the US side described as  “continued violations” in international transfer systems and the   failure of some Iraqi entities to comply with international guidelines to  combat money laundering and   terrorist financing.  

The source indicated that   Direct warnings 
 
the Iraqi delegation received direct warnings of the possibility of freezing additional assets and  imposing restrictions on dollar accounts  if urgent measures are not taken to regulate the Iraqi financial system and  prevent suspicious flows through some Iraqi banks and companies.
 
A new crisis is looming 
 
These developments come amid escalating tensions between Baghdad and Washington over economic and security issues, most notably restrictions on dollar transfers and US accusations against some Iraqi entities of dealing with entities on sanctions lists.
 
Observers believe that the new sanctions, if implemented,  will deal a severe blow to the Iraqi banking system and  could lead to a further deterioration in the value of the dinar and increased pressure on the local market at a time when the Central Bank of Iraq is trying to  revive investor confidence and  stabilize the exchange rate.
 
No official comment yet 
 
As of the time of writing this report, no official comment has been issued by the  Central Bank of Iraq or the  US Embassy in Baghdad   regarding the content of the meeting or the content of the warnings contained therein.   https://mustaqila.com/اجتماع-سري-في-إسطنبول-واشنطن-تهدد-بعقو/ 

Monetary Policy, Monetary Stability Approach, And Digital Transformation 2023-2025
 
Economic 07/27/2025 Baghdad: Morning  Among the new economic publications, the book 
Monetary Policy in Iraq, Monetary Stability Methodology, and Digital Transformation 2023-2025” 
     was released by financial expert Samir Al-Nusairi.
 
This book addresses several economic and monetary themes, reflecting the Central Bank of Iraq‘s orientations and its financial and banking reform policies in recent years, specifically for the period 2021-2026, with  a strategic outlook extending to 2025. 
 
Chapter One: The Central Bank and Opportunities
 
monetary stability
 
The author sheds light on the methodology of monetary policy, discussing the functions  and  objectives of the Central Bank of Iraq, the challenges facing monetary policy, and presenting   the steps towards monetary stability and the pillars of monetary policy for the period 2021–2023.
 
Chapter Two: Digital Transformation and Financial Inclusion
 
The chapter reviews the Central Bank‘s efforts in  digital transformation, developing electronic  payments, and  supporting financial inclusion, in addition to  developing payment and systems  government support for  information technology and   cybersecurity. 
 
Chapter Three: The Central Bank’s Strategy for Financial and Banking Reform 2024-2025
 
This chapter covers the strategic objectives of the reform, the Bank‘s vision for 2025, the  activation of economic measures, the regulation and financing of trade, and the  management of economic challenges and variables. 
 
Chapter Four: Government Support for Achievement
 
banking reform
 
The importance of cooperation between  government agencies and the Central Bank is highlighted,
 
with discussions on the comprehensive banking reform project, the role of the private banking sector, the  International Monetary Fund, and the  vision for reform in Iraq.
 
 
Chapter Five: Exchange Rates  and Recovery Procedures
 
It addresses the  causes of exchange rate fluctuations, the  factors affecting stability,  particularly the difference between the official and parallel rates, and the government’s role in stimulating the private banking sector.  https://alsabaah.iq/118049-.htm