Iraq Economic News And Points To Ponder Wednesday Evening 4-8-26
Iraqi Banks Under US Scrutiny: Who Controls The Transfers And Who Pays The Price?
April 7, 2026 Last updated: April 7, 2026
The Iraqi banking system has found itself under increasing regulatory pressure since late 2022, related to dollar transfers and import financing, as part of a broader tightening of international compliance and anti-money laundering regulations.
Bankers and economists say this tightening, practically linked to access to the US financial system through correspondent banks, has reshaped the remittance market in Iraq, reduced the operating margins of several private banks, and increased the cost of trade, with the effects quickly being felt by the market and consumers.
According to banking estimates, more than 70 banks operate in Iraq, both public and private, in addition to branches of foreign banks. However, the real activity is concentrated in a limited number of institutions.
Public banks hold the largest share of deposits and handle most official transactions and government salaries, while many private banks rely more on financing trade and remittances than on lending and investment, making them more sensitive to any restrictions related to the dollar or scrutiny of commercial documents.
Bankers describe the “transfers” mechanism as the heart of the crisis. A bank submits a request to transfer funds against import documents, and the transaction is then executed through foreign correspondents according to strict auditing procedures.
However, industry sources say that in previous years, loopholes were widely exploited through inflated invoices, fictitious import transactions, or inaccurate data, raising the risk rating and leading to escalating external pressures that impacted banks and the market.
Banking officials add that the restrictions are not being applied equally to everyone. Banks with stronger compliance systems and more stable correspondent relationships have been better able to process transfers, while a number of banks have suffered from restrictions, slowdowns, or rejections of transactions, leading to a concentration of some trade demand in specific channels.
According to observers, this concentration answers the question, “Who controls the transfers?” Control effectively shifts to banks that can meet auditing standards and to intermediaries who know how to manage official channels at a higher cost, or resort to informal channels when procedures become complicated.
As for “who pays the price?” the market answers this question quickly, according to economists, through three channels. The first is the increased cost of imports due to slower remittances, higher commissions, and increased documentation requirements, which is reflected in the prices of goods in a country heavily reliant on imports.
The second is the expansion of the informal market whenever a gap appears between the official and market exchange rates, thus putting pressure on purchasing power and increasing inflation.
The third is the decline in confidence in banks, as a large portion of the money supply remains outside the banking system, limiting banks' ability to lend and finance the real economy.
Bankers warn that the problem is no longer simply a matter of dollar liquidity, but rather a fundamental business model for a banking sector that relies more on remittances than on financing production.
The lack of effective lending and the limited scope of banking services are pushing banks to seek profit through dollar transactions and trade finance, which increases risks and makes the sector vulnerable to any external tightening.
Meanwhile, state-owned banks, despite their control over deposits, remain less agile in modernizing technology and developing services, creating a gap between their size and their role.
Experts believe that the true test of reform begins with measurable measures, including stricter auditing of import invoices and preventing inflation and forgery, developing compliance systems within banks, and restructuring weak banks through mergers or liquidations according to clear criteria. They also emphasize the need to enhance transparency in trade finance and reduce reliance on cash.
Furthermore, they stress that reducing the cost of transfers and protecting the market requires minimizing opportunities for manipulation, not merely managing the exchange rate.
Ultimately, the oversight of remittances has become a factor reshaping the banking landscape in Iraq: few institutions are able to operate within the required standards, others are declining or besieged by restrictions, and the market bears the brunt of this in prices and the cost of living.
While bankers speak of the necessity for swift internal reform to restore confidence and reduce risks, the open question remains: can Iraq transform the "dollar audit" into an opportunity to rebuild a banking sector that finances the economy, or will remittances remain an arena controlled by limited channels, with the markets and citizens paying the price?https://mustaqila.com/مصارف-العراق/
A Government Advisor Predicts Per Capita Income Growth Of $1,320 Per Month Over The Next Four Years
Baghdad – WAA – Amna Al-Salami The Prime Minister’s financial advisor, Mazhar Muhammad Salih, confirmed on Tuesday that regional competition requires a stable investment environment and major strategic projects, while he indicated that growth expectations until 2030 amount to 3.6% and per capita share is about $15,850 annually, while he clarified that the level of monthly per capita income will be $1,320 per month.
Saleh told the Iraqi News Agency (INA): “The latest IMF report reveals promising growth for Iraq amid ongoing challenges, and this development deserves great attention, as Iraq has achieved a distinguished position among the region’s economies, ranking fifth in the Arab world with a GDP of nearly $739 billion according to purchasing power parity.”
He explained that "this classification is not just a number, but an indicator of the recovery of the economy and the development of its own material and human engines, and its organizational capabilities that flourish over time, in addition to the state's ability to support development and improve the quality of life of citizens with high flexibility."
He continued: "As for growth indicators and prospects up to 2030, forecasts indicate real growth of about 3.6%, with low and stable inflation, and per capita output of about $15,850 annually."
He added, "These data reveal clear future opportunities, most notably: diversifying the economy away from oil and a single rentier economy, promoting local and foreign investment, developing infrastructure, and supporting modern technology and digital education, as these steps are essential for building a strong and sustainable economy."
He noted that “the ability to compete regionally remains an important criterion for assessing progress and building growth opportunities, as Iraq has the potential to enter the regional competition arena, but it needs a stable investment environment and constant protection for investors, the development of ports and roads and linking the economy to the region, including important regional strategic projects such as (the Development Road Project), while adhering to the project’s phased objectives and coordinating with the neighbor and the world at all times, and focusing on education, digital education, innovation and entrepreneurship without interruption, as well as ensuring the correlation between long-term political and financial stability, which are crucial factors for attracting investment and achieving sustainable development.”
He pointed out that "the current growth in development indicators reflects the strength of the Iraqi economy, but it requires transforming this level of capabilities into qualitative strength and sustainable momentum in the modernization and technological progress movement."
He concluded by saying: “The Iraqi economy must become an influential regional engine, as long as the state invests resources wisely and focuses on production and knowledge, to reach a stage where economic peace and sustainable development are fundamental pillars for the country.”
The International Monetary Fund announced on Monday that Iraq will be the fifth largest Arab economy in 2026, and predicted that the Iraqi economy will continue to grow by 2030.
The fund said in its report: “The data showed that Iraq ranked fifth as the largest Arab economy for 2026, in terms of GDP based on purchasing power parity (PPP), achieving a value of $739.13 billion, thus ranking 44th globally.”
According to the report, the ranking of the five major economic powers in the Arab world was as follows: Saudi Arabia topped the Arab world (16th globally), followed by Egypt in second place (18th globally), then the United Arab Emirates in third place, Algeria in fourth place, and Iraq in fifth place.
The report stated that "globally, three superpowers maintained their top rankings; China came in first with $43.5 trillion, followed by the United States in second place with $31.8 trillion, and then India in third place with $19.1 trillion."
According to detailed official indicators for Iraq, nominal GDP at current prices reached $273.91 billion, with a real growth rate of 3.6%.
The annual per capita GDP (PPP) reached $15,850, coinciding with the population reaching 46.64 million.
Regarding financial and monetary stability, the report noted that "the annual inflation rate remained stable at 2.5%, while net public lending/borrowing recorded a rate of -7.1%, and the current account deficit reached 1.1%."
The fund concluded its data with projections indicating that "the Iraqi economy will continue to grow by 2030."