Government lending programs remained suspended on Thursday as Iraq’s state-owned banks — particularly Rafidain Bank and Rasheed Bank — continued to halt advances and loans due to declining liquidity and the absence of clear credit planning, a well-informed source told dinaropinions.com.
The source said cash holdings at the two banks have dropped sharply after a period in which liquidity was sufficient to support citizen-focused lending programs, raising questions about how previously available funds were managed.
According to the source, operational weaknesses have compounded the crisis, including gaps in strategic and credit planning, slow adoption of modern banking technologies, and continued reliance on paper-based systems. These shortcomings have undermined efficiency and left state lenders struggling to keep pace with developments across the wider banking sector.
The downturn has also reduced revenues and weakened inflows to the state treasury, increasing pressure on oversight bodies and parliament to review the performance of government-owned banks.
“Administrative reform is now unavoidable,” the source said, stressing the need to appoint specialized professionals to senior management positions to strengthen governance and restore the banks’ economic role. Concerns also extend to accountability for mismanagement, suspected waste of public funds, favoritism in lending decisions, and legal scrutiny of overseas branches that could face closure due to poor administration.
The lending freeze comes amid deeper structural imbalances in Iraq’s banking system. Economists and financial experts told Shafaq News that despite growth in the number and capital of private banks, credit expansion remains limited, while state-owned banks continue to dominate deposits and liquidity flows.
They attributed this imbalance to long-standing weaknesses in financial intermediation, governance, and public trust, noting that higher capital levels and a larger banking sector have yet to translate into broader lending to the real economy — placing additional strain on state lenders already facing liquidity shortages.
