Iraq is implementing comprehensive banking reforms in cooperation with the Central Bank and international consulting firms.

The Iraqi economy is one of the most oil-dependent in the world, with oil accounting for more than 90% of government revenues and exports. This makes Iraq’s economic stability highly dependent on fluctuations in global oil prices.

Although Iraq has vast natural resources, decades of conflict, corruption, and weak governance have hampered its economic development. However, the Iraqi government, in collaboration with the Central Bank of Iraq and the International Monetary Fund (IMF), has begun implementing important reforms aimed at modernizing the banking system, enhancing transparency, and diversifying sources of income. These changes will have a significant impact on the future and stability of the Iraqi economy.

1. Oil dependence and economic fragility

The oil sector remains the backbone of the Iraqi economy, providing nearly all government revenue. When oil prices rise, the economy experiences rapid growth, but when they decline, budget deficits emerge, salaries are delayed, and investments in sectors such as health and education are reduced.

For example, the International Monetary Fund (IMF) (2025) reported that non-oil growth fell to about 2.5% in 2024 due to the volatility of oil revenues, demonstrating how deeply the Iraqi economy is intertwined with the oil sector. This heavy dependence creates a “boom and bust” cycle that impacts long-term planning, job opportunities, and social stability.

Effects:

Over-reliance on oil limits economic diversification.

Volatility in oil prices leads to instability in public services and salaries.

Weak investment in non-oil sectors such as agriculture and industry.

2. The role of banking and financial reforms

In 2025, the Iraqi government launched a comprehensive banking sector reform program in collaboration with international firms such as KPMG, Ernst & Young (EY), and the International Finance Corporation (IFC).
These reforms aim to modernize the banking system, increase transparency, and attract foreign investment. The Central Bank of Iraq is also working with the United Nations Development Programme (UNDP) to develop the digital economy and regulate e-commerce.

According to Iraq Business News (October 2025), Prime Minister Mohammed Shia al-Sudani emphasized that reforming the banking sector is a fundamental pillar for building confidence and boosting economic activity.

Effects:

Improving banking standards will make it easier for small and medium-sized enterprises to access financing.

Enhancing transparency will reduce financial and administrative corruption.

The shift to e-services will support modern commerce and entrepreneurship.

If these reforms succeed, Iraq will transform from a traditional cash economy to a more modern one based on technology and institutional trust.

3. Unemployment and weak private sector

Unemployment is one of Iraq’s most prominent economic and social challenges, especially among youth and women. A large number of citizens rely on government employment, while the private sector suffers from weak infrastructure, financing, and investment.

The IMF report (2025) indicates that improving labor market policies and financing could raise employment rates by about 2.5% over five years. To achieve this, Iraq needs to support entrepreneurship, expand vocational education, and stimulate domestic and foreign investment.

Effects:

High unemployment leads to increased poverty and social instability.

Supporting the private sector reduces dependence on government jobs.

Developing agriculture, tourism, and manufacturing industries could create thousands of new jobs.

4. Corruption and weak governance

Administrative and financial corruption and weak institutions are considered among the greatest obstacles to the development of the Iraqi economy. Both the World Bank and the International Monetary Fund (2025) emphasized that the lack of transparency and weak laws deter foreign investors and lead to the waste of public resources.

Although the government has begun implementing campaigns to combat corruption and enhance financial transparency, these efforts require greater institutional and legal support to ensure sustainability.

Effects:

Corruption widens the gap between social classes and reduces citizens’ trust in government.

Weak laws and regulations reduce investor confidence.

Improving governance will encourage international partnerships and investments.

5. The future outlook for the Iraqi economy

If Iraq continues to implement current economic reforms, the economic situation could improve significantly in the coming years. Diversifying the economy toward sectors such as renewable energy, agriculture, tourism, and digital services is expected to reduce dependence on oil.

The International Monetary Fund expects the success of structural reforms to lead to sustained GDP growth and expansion in the non-oil sectors. However, this improvement depends on political and security stability and continued cooperation with international institutions.

Potential positive effects:

Strengthening the financial system and increasing foreign investment.

Creating job opportunities for youth and women.

Improve infrastructure and promote trade.

Achieving long-term economic stability.

Potential negative impacts (if reforms fail):

Continued dependence on oil and economic volatility.

High unemployment and increased social tensions.

Weak international confidence and declining investment.

Conclusion

The Iraqi economy is going through a delicate phase combining challenges and opportunities. Although oil remains the primary source of income, ongoing reforms in the banking sector, governance, and economic diversification represent real steps toward transformation.
The greatest challenge remains transforming temporary oil wealth into long-term sustainable development. This requires transparency, investment in people, and building strong institutions that support innovation and integrity.

If Iraq succeeds in implementing these reforms and promoting economic diversification, it will be able to build a stable economy that creates jobs and improves the standard of living for future generations.

Economic Studies Unit / North America Office,
Rawabet Center for Research and Strategic Studies

Rawabetcenter.com

Trump appoints Mark Savaya as special envoy to Iraq

US President Donald Trump announced on Sunday the appointment of Mark Savaya as his special envoy to Iraq.

“I am pleased to announce that Mark Savaya will serve as Special Envoy to the Republic of Iraq,” Trump wrote on Truth Social.

The US President said, “Mark’s deep understanding of the relationship between Iraq and the United States and his extensive connections in the region will contribute to advancing the interests of the American people.”

Mark Savaya is a prominent American businessman and pioneer in the cannabis (marijuana) industry in Michigan. He is 40 years old and is known as the founder and CEO of Leaf and Bud, one of the fastest-growing cannabis companies in the state.

Mark Savaya was born to an Iraqi Chaldean family who emigrated from Iraq in the 1990s to escape unrest and settled in the Detroit, Michigan area. This area is known for being home to the largest Chaldean community outside of Iraq.

Burathanews.com

New instructions from the Central Bank of Iraq to prevent dollar smuggling starting next month

On Saturday, the Echo Iraq Observatory revealed new instructions issued by the Central Bank to all authorized banks in the country regarding financial transfers and customs clearance procedures related to the requirements for approving special commercial invoices.

The Observatory said in a statement received by Shafaq News Agency, “The Central Bank, in Circular No. (267/4/9) dated 10/15/2025, decided to include in commercial invoices a set of basic information, including: shipping and payment terms, value and invoice currency, and the Global Harmonized System of Classification and Labelling of Goods (GHS) code,” adding, “As well as the addresses of the importer and destination, an accurate description of the goods, their origin, their trademark, quantity and unit of measurement, and the unit and total price.”

He explained that “the circular stipulates that one of the following invoices must be approved: the final commercial invoice, or the preliminary invoice attached to the sales contract, provided that the final invoice contains all the data of the preliminary invoice.”

According to Echo Iraq, “these instructions will be implemented starting November 1, 2025,” indicating that “the aim of the decision is to regulate foreign financial transfers and enhance transparency and accuracy in customs clearance as part of the national automation project.”

The Observatory believes that “this step has several positive aspects, most notably enhancing the standardization of procedures and reducing errors in commercial transactions, in addition to supporting the customs automation project.”

This decision comes as part of the efforts of the Central Bank of Iraq and government agencies to develop the financial and administrative environment and improve the level of oversight and compliance with international standards in foreign trade.

The Eco Iraq Observatory is a media research institution specializing in analyzing the country’s economic performance. It focuses on oil prices and their impact on the budget, in addition to monitoring the performance of Iraqi banks and their role in supporting the economy and financing projects.

Shafaq.com

From Washington: A new banking and economic reform package for Iraq

The Iraqi delegation participating in the banking reform conference in Washington, D.C., on the sidelines of the International Monetary Fund and World Bank meetings, announced a new package of banking and economic reforms on Saturday aimed at strengthening the stability of the financial system and attracting investment.

“The government has implemented a series of steps as part of the economic and financial reform program, most notably the implementation of comprehensive strategic banking reforms in cooperation with the Central Bank of Iraq and international consulting firms, as well as the preparation of a three-year budget for the first time in Iraq’s history to ensure stable financial planning that attracts investment,” said Saleh Mahoud Salman, an advisor to the Iraqi Prime Minister, according to a statement received by Shafaq News Agency.

He added that “automating the customs system through the implementation of the United Nations ASYCUDA program has led to a significant increase in customs and tax revenues, the restructuring of government banks (Rafidain, Rasheed, Industrial, and Agricultural) and increased their operational efficiency, as well as the expansion of electronic payment systems and increased financial inclusion from less than 10% to more than 40% within two years.”

Salman continued, “Support programs have been launched for small and medium-sized enterprises to create job opportunities and stimulate the local economy,” noting that “these steps represent a pivotal stage in the economic reform process, and that the government will continue to support the development of the banking sector in cooperation with international institutions.”

Prior to this, the Central Bank of Iraq announced new instructions to all authorized banks in the country regarding money transfers and customs clearance procedures related to the requirements for the approval of special commercial invoices, with the aim of curbing currency smuggling.

This measure comes as part of the efforts of the Central Bank of Iraq and government agencies to develop the financial and administrative environment and improve the level of oversight and compliance with international standards in foreign trade.

Shafaq.com

Iraq’s foreign exchange reserves fell by more than $2 billion in one month.

The Central Bank announced on Saturday that its foreign exchange reserves had fallen to more than $2 billion by the end of July.

The bank said in an official statistic seen by Shafaq News Agency, “The foreign reserves of the Central Bank amounted to 94.714 billion dollars, equivalent to 123.128 trillion Iraqi dinars, as of July 31 of this year, a decrease of 2.305 billion dollars compared to last June, when reserves amounted to 97.019 billion dollars, equivalent to 126.125 trillion dinars.”

He added, “These reserves also decreased from last May, which amounted to $96.799 billion, equivalent to 125.839 trillion dinars.”

The bank indicated that “these reserves decreased from last year’s 2024 figure of $100.276 billion, or the equivalent of 130.347 trillion dinars, and decreased from 2023, when reserves reached $111.736 billion, or the equivalent of 145.257 trillion dinars.”

Shafaq.com

Central Bank Governor: Iraq’s internal and external debts amount to approximately $150 billion

Central Bank Governor Ali Al-Alaq said that Iraq’s internal and external debt has reached approximately $150 billion, in response to a parliamentary question directed to him by MP Raed Al-Maliki.

In a statement issued on Saturday, Al-Maliki quoted Al-Alaq as saying that Iraq’s internal debt had risen to 91 trillion dinars, and its external debt had reached $54 billion.

He added that the budget deficit is too large to be covered by loans and bonds, noting that “there are no restrictions on the US Federal Reserve’s use of oil revenues.”

According to Al-Alaq, “The value of the bonds that Iraq purchased in the United States amounted to $11 billion.”

Meanwhile, MP Hadi Al-Salami announced that the Federal Court has initiated a questioning process with the House of Representatives against Prime Minister Mohammed Shia al-Sudani over his failure to submit the budget tables and final accounts for 2025.

The Central Bank of Iraq announced last Saturday that Iraq’s domestic debt had increased for the month of July 2025.

The bank stated in a report seen by Shafaq News Agency that “Iraq’s domestic debt rose in July to 90.30 trillion dinars, an increase of 2.91 percent compared to last June, which reached 87.74 trillion dinars.”

He added, “The debt also increased by 16 percent compared to the same period last year, reaching 76 trillion dinars.”

The bank indicated that “the reason for the increase in domestic debt is due to a 1.72 percent decrease in government bank loans in July compared to June.”

It’s worth noting that the Echo Iraq Observatory previously considered that oil sales were no longer sufficient to cover the state’s monthly running expenses, which amount to approximately 11 trillion Iraqi dinars.

The observatory stated in a press statement received by Shafaq News Agency that “current expenditures represent the largest portion of the state’s expenditures, amounting to 11,503,656,980,146 dinars,” indicating that “this amount, out of a total of 27 trillion dinars, represents the total expenditures of the licensing rounds, the Chinese agreement, and investment.”

Shafaq.com

Government Financial Advisor: The Ministry of Finance has begun preparing the 2026 budget.

The Prime Minister’s Financial Advisor, Mazhar Mohammed Salih, confirmed on Saturday that the Ministry of Finance has begun preparing the 2026 budget, while specifying the disbursement mechanism in the event that the budget cannot be approved. Salih told the official agency, “In accordance with the Federal Financial Management Law No. 6 of 2019, as amended, the Federal Ministry of Finance is proceeding with preparing the draft federal general budget law for the country for the fiscal year 2026.”

He pointed out that “in the event that it cannot be approved within the specified constitutional or legislative timeframes due to the upcoming parliamentary term, the government will undertake disbursements in 2026 on a monthly basis at a rate of 1/12 of the actual current expenditures for the year 2025, including spending on ongoing investment projects, external obligations, and other due expenses.”

He also stated that “the Financial Activity will continue to manage revenue collection and continue disbursing through the expenditure items specified under the aforementioned Federal Financial Management Law until the 2026 budget is approved by the House of Representatives. At that point, allocations will be released for any activities required by economic growth and sustainable development, including new investment projects and other emerging commitments.”

Burathanews.com

Rafidain Bank suspends loan applications from parliamentarians and employees.

An informed source revealed on Thursday that the government-owned Rafidain Bank has suspended applications for loans and advances allocated to employees, retirees, and members of the Iraqi parliament.

The source told Shafaq News Agency, “Many requests for loans and advances for employees and retirees have been suspended, especially those that were months old and have not been granted.”

The source revealed that “some parties are favored over others in the granting process, based on favoritism and nepotism.”

The source pointed out that “the bank is relying on paper-based transactions for granting loans and advances instead of the announced electronic system, which has angered employees and retirees.”

Since 2023, Rafidain Bank has begun disbursing installments of “loans for employees, members of the Interior and Defense Ministries, and retirees” electronically, directly via MasterCard, after completing the requirements. The disbursements are at an interest rate of approximately 5% per annum, with a repayment period of up to five years (60 months).

Shafaq.com

The International Monetary Fund expects Iraq’s economy to grow by 3.6% next year.

The International Monetary Fund (IMF) forecast on Thursday that the Iraqi economy will grow by 3.6% in 2026, amid improved economic performance in the region and rising investment and production levels.

The Fund’s forecasts were included in its report on the regional economic outlook for the Middle East and North Africa, which noted disparities in growth rates among countries due to differences in economic conditions and financial policies in each.

According to the report, Sudan topped the list of the highest-growing countries in the region, with a growth rate of 9.5%, followed by Qatar with 6.1%, the United Arab Emirates with 5%, and Egypt with 4.5%.

Mauritania followed with a growth rate of 4.3%, followed by Morocco with a growth rate of 4.2%, while Saudi Arabia and the Sultanate of Oman recorded an expected growth rate of 4% each.

Kuwait is expected to achieve growth of 3.9%, Iraq 3.6%, followed by Bahrain 3.3%, while Algeria and Jordan will achieve similar growth rates of 2.9%. Tunisia comes in last in terms of expected growth of 2.1%.

The IMF indicated that these forecasts depend on continued stability in oil prices, improved non-oil activity, and the implementation of economic and structural reforms aimed at enhancing productivity and diversifying sources of income in the region’s countries.

Shafaq.com

Prime Minister’s Advisor: The Central Bank is leading a comprehensive shift towards reform.

The Prime Minister’s Financial Advisor, Mazhar Mohammed Salih, confirmed on Thursday that Iraq’s commitment to international standards paves the way for the return of dollar transactions, attracting foreign investment, and expanding financial inclusion. He stressed that the path of banking reform is ongoing and irreversible. Salih told the official agency, “Iraq’s commitment to international standards and banking transparency means that the Iraqi financial system has entered a phase of radical reform, which enhances international confidence and qualifies it to be an active player in the global economy.” He pointed out that “the most prominent gains are not limited to the return of dollar transactions to national banks, but also include attracting investment and expanding financial inclusion.”

He added, “Adherence to international standards requires that banking institutions adhere to anti-money laundering and counter-terrorism financing rules, implement transparent accounting and oversight systems, and digitally transform the banking infrastructure, including electronic payment systems and unified financial reports.” He continued, “This also includes openness to sound international financial services by contracting with global companies to develop banking systems, particularly financial auditing and financial technology companies.” He added, “This commitment places Iraq on the map of the global financial system and gives it an opportunity to integrate with international correspondent banks.”

He also explained that “the gains that will benefit Iraq will also lead to the restoration of dollar transactions with international banks, after some Iraqi banks were deprived of them due to poor compliance issues. This will also attract foreign investment, as investors seek a transparent and secure financial environment. It will also enhance financial inclusion by integrating broad segments of citizens into the banking system through digital services. This will also improve Iraq’s credit rating, which will positively impact its ability to obtain international financing on better terms.”

He also pointed out that “enhancing confidence in the Iraqi banking system is achieved through the confidence of international banks that will deal with the modernized banking system, which is compatible with international standards, which opens the door for Iraq to deal with correspondent banks in Europe and America. The Iraqi citizen’s confidence in the modernized banks is also increasing, and he begins to feel safe dealing with them, especially with the development of electronic services and the reduction of risks, in addition to the confidence of international companies contracting with Iraq, which are looking for a transparent financial environment that guarantees the integrity of transfers and contracts.”

He pointed out that “the level of progress in the field of banking reform, sponsored by Prime Minister Mohammed Shia al-Sudani within the government’s program and its implementation, and in cooperation with the Central Bank of Iraq, came in accordance with the 2025 Banking Reform Document.”

He stated, “The Central Bank of Iraq is leading a comprehensive shift towards reform, including increasing capital in agreement with the banking system and implementing comprehensive governance.”

He also explained that “the development of modern digital systems is no longer an option, but a necessity. This has already begun in some leading banks, despite ongoing challenges, such as historically weak trust and varying levels of preparedness among banks.” He emphasized that “the reform path is clear and irreversible.”

Burathanews.com