Iraq Economic News and Points To Ponder Saturday Afternoon 7-5-25
The Macro-Policy Gap Between The Banking And Economic Sectors
Dr. Haitham Hamid Mutlaq Al-Mansour Economy News – Baghdad There is no doubt that the overall policy between the banking and economic sectors in Iraq suffers from a lack of unified efforts and a lack of achievement of objectives. The two sectors pursue separate, complex paths, deepening a gap between them that reflects fundamental differences in vision, priorities, and mechanisms.
It becomes clear to the observer that the relationship between the two sectors is not merely a technical issue, but rather is fundamentally a conflict reflecting a conflict of interests and competing priorities between institutions.
Therefore, this political gap is one of the deepest obstacles to achieving genuine, comprehensive reform.
While the banking sector plays a key role as a financial intermediary for economic activities such as agriculture, industry, trade, services, transportation, and other vital sectors, it is not only a source of economic value generated from goods and services, but rather a tool for attracting savers and investors.
From this, it is understood that banking reform policies include improving the efficiency of credit allocation, reducing non-performing loans, or increasing the rate of project lending, for example, to ensure the safe and efficient flow of funding to productive sectors such as industry or technology. The banking sector's mission ends where the economic sector's activity of investment and development begins.
Therefore, the weak relationship between banking and economic policies in Iraq can be likened to the country's "Achilles' heel." This fragile connection is a fatal weakness that threatens economic growth and stability, despite the country's vast resources.
The economy appears strong, with massive oil reserves amounting to 145 billion barrels, but the banking and economic systems are unable to transform this wealth into sustainable development.
By examining models of policy failure in many countries, we find that the aforementioned gap is evident in the distorted growth of banking activity, with many loans concentrated in unproductive sectors such as real estate, consumption, and the public sector, widening the gap between financing and real economic growth.
The banking system may be advanced, adopting financial technology or Basel standards, but the economy suffers from weak non-oil production and structural fragility, represented by the dominance of the informal sector and the growth of an unattractive business environment. The result is high financial liquidity without balanced economic growth.
In addition to the conflict between monetary and fiscal policies, we find that central banks aim for financial stability by targeting inflation and exchange rate stability, while governments focus on economic growth, such as increasing spending, employment, and subsidizing basic commodities.
This conflict leads to high bank liquidity amid an economic slowdown (as in Egypt, for example, during some periods). Bank credit expands in the absence of real investment projects, as in the debt crisis in Lebanon.
The economic policy gap re-emerges, with the separation between banking supervision and economic policy. Central banks monitor the health of the banking sector but do not control the direction of credit to productive sectors. This is especially true in emerging economies, where governments may intervene to direct loans and financing to small businesses.
This hinders economic growth, as they lack integrated information systems that link banking performance to economic performance. Banks may grant large loans for real estate, but there is no analysis of the impact of this on economic distortions such as real estate bubbles at the expense of the industrial sector.
Banking services are clearly positioned against traditional sectors such as agriculture, while industry still relies on traditional systems. This creates a fast financial economy versus a slow real economy.
On the other hand, there are numerous successful experiences in reconciling the banking and productive economic systems, too numerous to mention.
We can draw inspiration from them, but only Singapore, which transformed unproductive financing into productive financing by prohibiting banks from lending more than 40% of their portfolio to the real estate sector in 1970.
Then, 60% of credit was directed to manufacturing and technology through the Singapore Economic Development Board (EDB), a government agency that aims to attract investment and promote economic growth in Singapore.
It offers incentives for global companies to establish their headquarters in the country, with a focus on the technology and financial sectors. The result, after a long-term plan spanning three decades, is that Singapore has become one of the most competitive economies in the world.
Returning to the situation in Iraq, it suffers from structural imbalances and a reliance on oil revenues, which constitute approximately 95% of the general budget's financing.
This leaves the economy vulnerable to inflation and price fluctuations. This has led to the decline in growth in productive sectors, the emergence of a banking sector that directs its financing activity toward unproductive sectors, such as luxury real estate projects, without significant market demand.
It also finances the import of luxury goods instead of developing and strengthening local industry. Banks rely on government deposits from oil revenues rather than actual savings, and there is a lack of guiding policies to stimulate financing for private productive and development sectors.
As a result, Iraq became a net importer in the foreign trade sector, which deprived it of opportunities to develop the specialization and competitiveness of its financial market, which weakened the banking sector’s ability to use financial and monetary instruments, especially interest rates, bonds and securities, to achieve overall equilibrium, and created a total imbalance far from the equilibrium interest rate, which limited the interest rate’s ability to stimulate capital and curb inflation, thus increasing financial fragility and deepening dependence on rents.
Therefore, it was possible to identify important axes to narrow the gap between banking and economic reforms through the following:
Diversifying the economy through development financing: Boosting real non-oil GDP through an expansionary economic policy that stimulates agricultural and industrial investments will gradually create a traditional balance between the real and monetary economies through monetary instruments such as interest rates and bonds, in light of a trade policy aimed at reducing imports.
Establishing an Iraqi bank for smart development finance: to finance productive projects in accordance with the investment map that supports the diversification of the Iraqi economy.
Building a sovereign fund to enhance financial and economic sustainability: by converting a portion of oil revenues into investments in productive sectors such as alternative energy and technology.
Reducing the dominance of the informal banking system over a large portion of financial transactions, through a scale of incentives and restrictions to regulate the work of the informal banking system, to enhance the capacity of fiscal and monetary policies and promote coordination between them.
Transparency in large loans by requiring banks to disclose data on large borrowers and grant loans based on creditworthiness.
Transparency of the general budget by publishing all major contracts, grants, and loans on an electronic platform.
Strengthening financial infrastructure, undermining technological backwardness, and promoting financial inclusion by modernizing payment systems, expanding bank branches, and developing the emerging base of fintech companies through attractive incentive policies.
Develop a strategy to redirect credit towards production to achieve economic diversification through coordination between monetary, fiscal, trade, industrial, agricultural, and other macro policies.
Establishing a sovereign technology fund with 10% of oil revenues invested.
Therefore, it is time to unify efforts and coordinate objectives to take steps to narrow the overall policy gap between the banking and economic sectors. Historical experience tells us that countries that waste their crises disappear, while those that invest in them grow and prosper. 311 views https://economy-news.net/content.php?id=57022
An Ounce Is Down By 25,000 Dinars.. Gold Records A Decline In Iraq
Stock Exchange Gold prices in Iraq witnessed a slight decline on Saturday, with an ounce reaching 4,365,594 dinars, compared to Thursday's price of 4,390,135 dinars. +964 images from the (Network) platform: 86 views https://economy-news.net/content.php?id=57002
A Slight Decline In Iraqi Oil Prices In Global Markets.
Economy | 05/07/2025 Mawazine News – Baghdad Iraqi oil prices recorded a slight decrease during daily trading on the global market on Saturday.
According to data reviewed by Mawazine News, Basra Medium crude oil recorded $69.11 per barrel, while heavy crude oil recorded $66.11 per barrel, with a change of -0.11 for both.
The data also showed global oil prices, with British Brent crude recording $68.30 per barrel, while US West Texas Intermediate crude oil recorded $66.50 per barrel, with a change of -0.50 for both. https://www.mawazin.net/Details.aspx?jimare=263476
New Rise In Dollar Prices
Economy |05/07/2025 Mawazine News - Baghdad - The US dollar exchange rate witnessed a slight increase on Saturday morning in Baghdad markets.
The dollar price rose on the Al-Kifah and Al-Harithiya stock exchanges to 141,200 Iraqi dinars for every $100, while last Thursday it recorded 141,150 dinars for every $100.
Selling prices rose in exchange shops in local markets in Baghdad, where the selling price reached 142,250 Iraqi dinars for every $100, and the buying price reached 140,250 dinars for every $100. https://www.mawazin.net/Details.aspx?jimare=263481
Al-Maliki: Iraq Has Achieved Self-Sufficiency In Wheat And Exports 11 Agricultural Products Abroad.
Today 08:30 Information/Baghdad… Minister of Agriculture Abbas Jabr al-Maliki revealed that Iraq has made significant progress in the agricultural sector, noting that the country has achieved self-sufficiency in wheat production,which has contributed to an increase in the number of mills and a saving in hard currency.
In a televised interview followed by Al-Maalouma Agency, Al-Maliki said, "There are 13 basic agricultural products available locally and banned from import in support of the national product," indicating that "Iraq currently exports 11 agricultural products abroad, and its exports reached two million tons during the past year."
He added, "The wheat crop is increasing every year, while only the barley crop has been reduced as part of the agricultural plan, while palm cultivation continues to increase, currently exceeding 23 million palm trees." He pointed out that "local production has become increasingly desirable to Iraqi citizens, and that the Ministry of Trade was suffering from a problem with wheat storage capacity.
However, the abundant production has allowed Iraq to donate quantities of wheat to Lebanon and Gaza in response to the appeals, and to ensure the availability of large quantities locally."
Al-Maliki concluded by pointing out that “there are major investment projects in the field of wheat and potato production, which will enhance the country’s food security.” https://almaalomah.me/news/103409/economy/المالكي:-العراق-حقق-اكتفاء-ذاتيا-من-الحنطة-ويصدر-11-مادة-زرا
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