Iraq Economic News and Points To Ponder Late Sunday Evening 5-24-26
The Dinar Is Under Test During Crises... Will The Central Bank Succeed In Protecting The Market From Economic Storms?
Baghdad Today – Baghdad Economic and financial affairs expert Nasser Al-Tamimi confirmed on Sunday (May 24, 2026) that the ability of the Central Bank of Iraq to stabilize the exchange rate of the dinar is directly linked to the size of foreign reserves and the efficiency of monetary policy management.
Al-Tamimi told Baghdad Today that the Central Bank currently has effective tools to contain pressures on the market, most notably managing the currency sale window, regulating foreign transfers, and direct intervention through cash reserves.
Countering market pressures with monetary tools
He explained that “the stability of the exchange rate does not depend solely on financial abundance, but also on the ability of the central bank to achieve a balance between the local demand for the dollar and the size of its supply, in addition to strengthening confidence in the banking sector and regulatory procedures.”
He noted that “the current foreign reserves give the central bank a good margin for maneuver in the face of any future pressures,” but stressed at the same time that the continuation of this stability remains linked to the state’s ability to control public spending and diversify sources of revenue away from near-total dependence on oil.
Why is the government insisting on not devaluing the dinar?
Al-Tamimi added that “the government’s and monetary insistence on not reducing the value of the dinar has important economic and social dimensions, as it contributes to reducing inflation waves and preserves the purchasing power of citizens, especially with the Iraqi market’s extensive reliance on imported goods.”
He noted that this approach “may help to calm public fears in the short term, but it may open the door to speculation if it is not accompanied by clear economic messages and financial reforms that enhance market confidence.”
A message of reassurance to investors and markets
He stressed that “the decision to fix the exchange rate sends reassuring messages to investors and foreign companies that Iraq is striving to maintain a stable and predictable monetary environment,” noting that “the international community usually views currency stability as an indicator of a country’s ability to manage financial and monetary balances, which is reflected positively in its credit rating and the confidence of international institutions.”
Ongoing threats to the Iraqi economy
Regarding external factors, Al-Tamimi explained that “the Iraqi economy remains highly sensitive to fluctuations in oil prices, as it is the main source of public revenues,” warning that “any sharp and continuous decline in global oil prices could put pressure on both public finances and the exchange rate.”
He also noted that “regional tensions and turmoil in global markets could affect dollar flows and trade,” stressing the need for monetary and financial authorities to maintain comfortable levels of foreign reserves, while adopting proactive policies to avoid any future pressures that might lead to a devaluation of the dinar.
The Iraqi economy relies mainly on oil revenues, which constitute the largest share of the general budget, making the stability of the exchange rate closely linked to global oil prices and the level of foreign reserves at the central bank.
Observers believe that any regional disturbances or a decrease in oil revenues directly affect local markets, given Iraq’s heavy reliance on imports to secure food, goods, and basic commodities, which makes the stability of the dinar a sensitive economic and social issue that directly affects the lives of citizens. https://baghdadtoday.news/299898-.html
Iraq Enters 16th Month Without Budget As 4,500 Projects Stall
2026-05-24 / Shafaq News Iraq entered its 16th consecutive month without approving a federal budget while more than 4,500 projects remain suspended across the country, exposing widening strains on public finances, investment planning, and essential services.
The stalled projects include hospitals, schools, bridges, tunnels, water networks, and sewage infrastructure, some frozen since 2014, according to parliamentary Services Committee member Safaa al-Jabri, who warned that delays are increasingly affecting critical sectors such as healthcare and education.
“The current situation requires urgent intervention,” al-Jabri told Shafaq News, calling for a “realistic” 2027 budget focused primarily on unfinished and service-related projects rather than “traditional expenditure-based budgeting.”
The prolonged delay has left Iraq operating without a formally approved federal budget since the expiration of the country’s three-year budget cycle for 2023–2025, pushing state institutions deeper into temporary financing mechanisms and limiting the government’s ability to launch new investments.
Under Iraqi law, the government was required to submit the 2025 budget schedules to parliament before the end of 2024. Yet from January 2025 through May 2026, lawmakers neither voted on nor formally ratified the budget tables, leaving ministries and provinces dependent on restricted spending allocations carried over from previous fiscal periods.
Read more: Iraq’s budget: political fiscal gaps threaten national stability in 2025
Prime Minister’s economic adviser Mudhir Mohammed Saleh said Iraq had effectively exited the three-year budget cycle at the end of December 2025 and was now operating under the Financial Management Law No. 6 of 2019. That mechanism allows spending based on the “1/12 rule,” enabling the government to finance salaries and operational expenses through monthly allocations equivalent to one-twelfth of previous annual expenditures.
Saleh told Shafaq News that the arrangement has so far prevented a complete financial breakdown by allowing the continuation of salaries, basic operational spending, and funding for projects already close to completion.
However, he stressed that the system blocks the launch of new strategic or investment projects without parliamentary approval of a new federal budget.
“The budget is no longer just a technical financial instrument; it has become a tool for economic stability and absorbing external shocks.” He linked the growing fiscal pressure to escalating geopolitical risks in the Gulf, particularly fears surrounding maritime trade disruptions and what he described as the “Hormuz shock,” referring to threats facing oil exports through the Strait of Hormuz.
The political deadlock surrounding the budget also remains unresolved. Finance Committee member Rebar Karim told Shafaq News that passing the 2026 federal budget depends on the formation of the next government and the submission of its program to parliament.
Karim said the committee was prepared to review and approve the budget “within a short timeframe” once the government submits the draft law, adding that parliament had received assurances there was currently no liquidity crisis and that public-sector salaries remained secured for the coming months.
Economic and financial expert Safwan Qusay argued that the crisis extends beyond procedural delays in passing a budget and instead reflects broader vulnerabilities in Iraq’s economic model. “The real challenge is declining oil revenues and the state’s diminishing ability to finance operational spending,” Qusay told Shafaq News.
He called for expanding partnerships with the private sector to reduce pressure on the public payroll system, proposing that some government-run sectors shift toward private operation models while maintaining state ownership. Qusay also urged Iraq to diversify its export routes away from excessive reliance on Gulf shipping corridors, pointing to alternative outlets through Aqaba, Baniyas, and Ceyhan, alongside expanded land transport options.
Read more: What does Iraq's new government promise? A guide to Ali Al-Zaidi's ministerial program
The warnings come amid escalating Gulf tensions and growing fears over disruptions to oil flows through the Strait of Hormuz, which carries around 20% of global oil supplies.
Qusay also warned that weak non-oil exports and heavy import dependence continue to pressure Iraq’s foreign currency reserves and exchange-rate stability, calling for closer coordination between fiscal and monetary policy.
The absence of a budget has also intensified concerns over employment and recruitment, with ministries unable to move forward on large-scale hiring or development plans under temporary spending rules.
The debate comes as Prime Minister Ali al-Zaidi’s government attempts to frame its upcoming fiscal agenda around economic reform, diversification of state revenues, and reduced dependence on oil income. Al-Zaidi has recently pledged that the next budget will prioritize productive and service-oriented projects while tightening spending controls, combating corruption, and expanding job opportunities.
Read more: Liquidity shortage delays Iraqi salaries: Experts warn of prolonged financial strain
https://shafaq.com/en/Report/Iraq-enters-16th-month-without-budget-as-4-500-projects-stall
Central Bank Governor: Banking Reform Is Receiving Direct Attention From The Prime Minister
Baghdad – WAA The Governor of the Central Bank of Iraq, Ali Al-Alaq, confirmed on Tuesday that there is no intention to reduce the exchange rate of the dinar against the dollar. While denying the existence of any American embargo on Iraqi funds, he indicated that the banking reform file is receiving direct attention from Prime Minister Ali Al-Zubaidi.
Al-Alaq told a number of journalists, as reported by the Iraqi News Agency (INA), that “there is no intention to reduce the exchange rate of the dinar against the dollar, and we will help the government overcome the repercussions of any potential closure of the Strait of Hormuz by discounting treasury bonds and securing salaries,” noting that “the cash reserves are currently being invested in several countries, and there is no American embargo on Iraqi funds.”
He added that "the US Treasury and the Federal Reserve praise the role of the central bank," noting that "the central bank provides dollars to travelers and traders at the official rate."
He explained that "most banks have reached the stage of merger or liquidation, and only one or two banks remain that are unable to continue," stressing that "the banking reform file is receiving direct attention from the Prime Minister, and there is an expected meeting in the coming days with the Federal Reserve and the US Treasury Department."
He confirmed that he "directly oversees the banking reforms file, and the banks concerned and the consulting firm have made significant progress in implementing the reform requirements," noting that "a meeting is expected in the coming days that will bring together Oliver Wyman and the Central Bank of Iraq with the US Federal Reserve and the US Treasury Department."
He added: “The meeting will pave the way for the transition to dealing in other foreign currencies for banks that have completed all the required requirements and procedures,” noting that “there is no truth to what is being said about the Central Bank obstructing banking reforms, and our interest lies in the return of the deprived banks to activity as quickly as possible.”
He concluded by saying: "The media has a major role, and the international community is watching with interest what is being said by parliamentarians, analysts, and local media." https://ina.iq/ar/economie/263703-.html
Iraq's PM Commits To Equal Salary Funding And Oil Guarantees For Kurdistan Region
2026-05-24 Shafaq News- Baghdad/ Erbil The Iraqi government has issued direct instructions to the Finance Ministry to fund Kurdistan Region civil servant salaries on equal terms with the rest of Iraq, the head of the Diwan of the Kurdistan Region Council of Ministers confirmed Sunday, disclosing the substance of talks between KRG Prime Minister Masrour Barzani and federal Prime Minister Ali al-Zaidi in Baghdad.
Omed Sabah, who accompanied Barzani's delegation, told reporters the meetings addressed six priority files: employee salaries, non-oil internal revenues, oil export mechanisms, the return of foreign oil companies, dam projects, and the rollout of the ASYCUDA automated customs system at border crossings.
On salaries, Sabah said al-Zaidi personally informed Barzani that he had issued instructions to the federal Finance Ministry to release Kurdistan Region payroll funding regularly and without discrimination —a long-contested point between Baghdad and Erbil that has repeatedly disrupted public sector payments in the region.
On the oil file, foreign companies operating in Kurdistan had demanded formal security guarantees from Baghdad following recent attacks targeting oilfields in the region. Al-Zaidi, according to Sabah, gave those guarantees personally.
A high-level delegation from the KRG Ministry of Natural Resources, accompanied by representatives of the foreign oil companies, is also scheduled to travel to Baghdad after the Eid al-Adha holiday to negotiate the terms of resuming exports and reach a final agreement, Sabah said.
Shiite Coordination Framework lawmaker Mukhtar al-Moussawi, speaking from the federal side, described the talks as achieving "notable progress" and reflecting "a shared political will" to stabilize ties and support al-Zaidi's government. He did not rule out a "new phase" of cooperation with Erbil if the current momentum holds.
The Baghdad talks also brought Barzani before Parliament Speaker Haibet al-Halbousi, Supreme Judicial Council President Faiq Zaidan, and State of Law coalition head Nouri al-Maliki.
The KDP, the dominant party in the Kurdistan Region, backed al-Zaidi's nomination as prime minister earlier this year and secured commitments from him to resolve outstanding Baghdad-Erbil disputes, guarantee the region's constitutional budget share, and implement Article 140 (HCL) of the Iraqi constitution, the long-stalled provision governing the status of disputed territories, including the oil-rich province of Kirkuk.
Read more: Into2026, Baghdad and Erbil face the same disputes—with higher stakes