Iraq Economic News and Points To Ponder Thursday AM 9-19-24
Iraqi Banks...A Classic Mentality That Prevents Keeping Pace With Global Development By Preferring The "Government" Over The "National"
Reports and analyses Central Bank US sanctions Iraqi banks Private banks
2024-09-17 01:44 -- Shafaq News/ Iraq is moving towards restructuring government banks, after
this body has become unable to provide modern banking services and has become burdened with a deep legacy of accumulated burdens, credit defaults and other problems.
The restructuring demands came after years of pressure and demands from the International Monetary Fund to restructure the Iraqi government banks, which hold most of the country's deposits,
to develop its banking system and be able
to enter the global banking market and
make it more compatible with the economy.
Acquisition of government banks
The Prime Minister’s Advisor for Economic Affairs, Mazhar Muhammad Saleh, said in an interview with Shafaq News Agency,
“The structuring of the banks came in accordance with the government curriculum that outlined the features of comprehensive banking reform, as government banks dominate 88% of the banking system’s investments, and only 12% remains for the private banking system.” Of these investments,
therefore, the competitive foundations of the banking market are considered incomplete unless government banks are placed on the rules of market operation in terms of efficiency, administrative governance, and developing levels of compliance similar to international banking,” noting that
“the reform will include private banks with the same standards.” He added,
"The basics of reform in private banks are viewed from the perspective of what is called financial depth, and
one of the most important indicators of that depth is (the ratio of cash credit granted to the total deposits in private banks),
but in contrast, we find that the market share is no more than 63 private banks."
These credit and creative operations still only account for 15%, despite the government banking system’s acquisition of 85% of the credit activity, deposits, and investment banking operations, which indicates the dominance of its assets or assets over the total assets of the banking system.” He pointed out that
"the time has come to reform the banking sector, both governmental and private, in a way that achieves harmony, unity and high competitiveness in the banking market, as well as its governance and digital integration with the banking market in the world.
This is what the banking reform policy that the government is currently adopting is working on, in coordination with the stakeholders included." “With the reform steps and its current program in the government and private banking sectors.”
The process of studying the structure of Iraqi banks began after Prime Minister Muhammad Shiaa Al-Sudani met with a delegation from the international company Ernst & Young, where he directed, on 1/27/2023, the implementation of a plan to develop the performance of Rafidain Bank extending for eight months, through the international company.
Difficulty in the structuring process
The former director of the Central Bank of Iraq, Mahmoud Dagher, said in an interview with Shafaq News Agency,
“Government banks and the process of restructuring and developing them and making them consistent with modern banking work is very difficult for several reasons, including that
these banks have become more like a treasury for distributing salaries to state employees than they are banks for carrying out a process.” Banking".
He continued that other reasons are that the technical level in these banks is almost non-existent.
Indeed, these banks, especially Al-Rafidain and Al-Rashid Banks, had it not been for the electronic payment companies that support them, they would not have been able to complete any work.
Therefore, they would not have worked without these companies, in addition to the huge number of their branches and the large number of employees present.
This makes it difficult to change the reality of these banks.” He pointed out,
“The presence of international sanctions and the presence of decisions of courts abroad, proving the creditors of some government banks, which are not resolved, and this is the reason for imposing international isolation on them, and therefore they cannot deal internationally,” stressing that
“it is absurd to spend huge sums of money that do not lead to decisive results, as All the costs spent on these banks will not lead to restructuring in order to coordinate the work of government banks, especially Al-Rafidain, Al-Rashid, and some specialized public banks, in a way that parallels the work of modernization and technological development that took place in banks such as the Iraqi Trade Bank.”
The Rafidain and Al-Rashid government banks were subjected to international sanctions during the nineties of the last century following the invasion of Kuwait by Saddam Hussein’s regime, and
they are still imposed on it in international dealings with them, especially with regard to the issue of financial transfers.
Old banking system
Economist Bassem Jamil Antoine said in an interview with Shafaq News Agency,
“Government banks have for a long time been operating within an old banking system without modernization, and
these banks must keep pace with international banks,” adding at the same time that
“these banks are the safety valve.” He added,
"These banks remain in need of development, eliminating administrative routine, and having employees undergo training courses to keep pace with developments that have occurred in international banks," noting that
"banks are not stores of cash, but rather they must provide advanced credit banking services." He stressed that
"the idea of restructuring banks has been proposed for twenty years, and ideas and studies were presented, but they were not adopted," stressing that
"the bank needs security and administrative stability and independence in work."
The Ministry of Finance owns six government banks: Al-Rafidain Bank, Al-Rasheed Bank, Al-Nahrain Islamic Bank, Agricultural Bank, Industrial Bank, and Iraqi Trade Bank.
Al-Rafidain Bank is an Iraqi government bank, founded in Baghdad in 1941, as the first Iraqi commercial bank.
It has 146 branches inside Iraq, and some other branches are spread outside it in Jordan, Egypt, the United Arab Emirates, Lebanon, Bahrain, and Yemen.
Al-Rasheed Bank is an Iraqi government bank, founded in Baghdad in 1988, as an Iraqi commercial bank, with 162 branches spread inside Iraq. https://shafaq.com/ar/تقارير-وتحليلات/المصارف-العراقية-عقلية-كلاسيكية-تصد-مواكبة-التطور-العالمي-بتفضيل-الحكومي-على-ال-هلي
Warnings Against Relying On The “Rentier Economy”: Use Effective Systems And Digital Infrastructure - Urgent
Economy | Yesterday, 14:59 | Baghdad today – Baghdad Today, Wednesday (September 18, 2024), the specialist in economic and financial affairs, Nawar Al-Saadi,
warned of the danger of Iraq’s continuation of the rentier economy, while giving solutions to overcome the danger of this matter. Al-Saadi told “Baghdad Today” that
“the Iraqi economy is considered a rentier economy par excellence, as
the state depends up to 90% on oil revenues to finance its general budget,” noting that
“this type of economy is very natural and is exposed to severe danger when oil prices decline.” In global markets,
which prompts the government to search for additional sources of income to avoid future financial crises, and imposing taxes is considered a step within the government’s attempts to create new sources of income from non-oil sectors, and
this is in line with the reforms proposed by the government in the recent period with the aim of diversifying the Iraqi economy.”. He added,
"The government's success in implementing these policies remains dependent on the ability to confront the main challenges that hinder economic reforms,
the most important of which is the widespread corruption in many government sectors, and the bureaucracy that burdens the reform process," stressing that
"the government needs to develop effective systems for collecting taxes from sectors." New, in addition to providing the digital infrastructure necessary to support this transformation.” Al-Saadi stated,
“In the long term, if the government succeeds in
overcoming these challenges and
develops effective and sustainable strategies to collect taxes from various sectors,
it may be able to create sustainable sources of income that help reduce excessive dependence on oil,
which contributes to the stability of the Iraqi economy, but the matter is
“It requires strong political commitment and comprehensive institutional reforms to achieve this.”
Economist Nabil Al-Marsoumi confirmed on Wednesday (September 11, 2024) that the
fair price of oil is the one that achieves the interests of producers and consumers together.
Al-Marsoumi said on his Facebook platform, followed by “Baghdad Today”, that
“the fair price for oil is the one that achieves the interests of producers and consumers together, that is, the price that achieves good financial revenues for producers that enable them to return part of it to renew and increase oil production capacities.” He added:
“It also enables consumers to obtain oil at reasonable costs that facilitate economic growth,” explaining:
“The price can be set in the seventies as the fair price for both parties,
but when the price falls below $70, it fulfills the interests of consumers because it enables them to obtain energy at a cost.” Cheap, thus reducing the prices of production inputs and increasing the competitiveness of their produced goods.” He continued:
“But on the other hand, it is harmful to producing countries because it reduces their oil revenues and frustrates investment in developing oil production, and vice versa, when the price is $80 and rising, this price is harmful to economic growth in consuming countries.
It also reduces demand for oil in the long term, even though it achieves large revenues.” For oil producing countries.
Oil prices are witnessing a noticeable decline, especially in futures contracts, which specialists believe may affect Iraq's rentier economy and thus the state and the citizen.
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