Iraq Economic News and Points To Ponder Wednesday Morning 9-2-26
Between External Borrowing And Removing Zeros... The Government Faces Difficult Choices To Address The Financial Crisis
31 Aug 13:51 Information/Report... As pressure mounts on Iraq's public finances, a range of options for addressing the liquidity crisis are resurfacing. These include resorting to external borrowing and restructuring the local currency.
Parliamentary sources confirm that the project to remove zeros from the currency has not yet entered the implementation phase, while economists discuss the possibility of securing a substantial external loan to provide liquidity and bolster reserves.
This comes amidst ongoing challenges related to public spending and the heavy reliance on oil revenues, meaning any decline in oil prices or revenues quickly impacts the state's ability to finance its expenditures and obligations.
External borrowing: The fastest solution?
Economic expert Abdul Rahman Al-Mashhadani believes that the government's move towards external borrowing from international banks represents one of the quickest available solutions to address the liquidity shortage and overcome current financial pressures.
Al-Mashhadani told Al-Maalouma that external loans offer Iraq grace periods of several years before repayments of installments and interest begin. This provides the government with time to secure repayment resources without creating immediate pressure on public spending.
He also believes that resorting to borrowing can contribute to replenishing the central bank's reserves, especially given the depletion of some of them due to market financing requirements and government spending.
Al-Mashhadani suggests that Iraq could request a loan of up to $20 billion, arguing that the current debt level, compared to the size of the economy and oil revenues, gives the country room to maneuver in international borrowing markets.
But does borrowing address the root of the problem?
While borrowing may provide a quick fix for the liquidity problem, resorting to it does not represent a final solution to the structural imbalances in the Iraqi economy, as loans remain financial obligations that the state will need to repay in the future.
This means that the success of borrowing in alleviating the crisis depends on how the funds are used and whether they are directed towards supporting financial stability, financing productive projects, and reducing imbalances, rather than being used to cover recurring expenses without addressing the sources of the deficit.
Furthermore, continued reliance on oil as the primary source of revenue leaves Iraqi finances vulnerable to the fluctuations of global markets, making fiscal reform and diversification of income sources essential alongside any temporary financing solutions.
Removing zeros... an old project resurfaces
. The project to remove zeros from the Iraqi dinar has resurfaced following reports about the possibility of issuing a new currency in early 2027.
However, MP Murtadha Afwin confirmed to Al-Maalomah that the project has not yet moved to the implementation phase, stressing that removing zeros does not in itself represent a solution to the economic crises plaguing Iraq.
This stance highlights the need to distinguish between restructuring currency denominations and raising the real value of the currency. Removing zeros, if implemented, primarily aims to simplify monetary transactions and reduce the volume of circulating currency.
It does not automatically increase the purchasing power of the dinar or address inflation and the budget deficit.
The project to remove zeros has been under discussion in Iraq for years, and the Central Bank has previously addressed it as part of plans to restructure the currency and facilitate monetary transactions.
Official positions vary, and an important point emerges here: discussing the removal of zeros or external borrowing does not necessarily imply a final government decision on these matters. The Iraqi government has recently confirmed that there are no official plans to change the currency or remove three zeros, and it has denied any intention to borrow externally.
It described the financial situation as a temporary liquidity crisis, not a structural financial crisis.
Conversely, political and economic statements continue to raise the issues of borrowing and removing zeros within the public debate on how to address financial pressures, reflecting the extent of the debate surrounding the options the state might adopt in the coming period.
The liquidity crisis requires broader solutions.
Between the option of external borrowing and the project to remove zeros from the currency, a genuine solution to the financial crisis seems linked to reforms that go beyond monetary measures alone. These reforms include controlling public spending, boosting non-oil revenues, revitalizing the private sector, reviewing government expenditures, and addressing areas of waste and corruption. End/25m
Living Costs Squeeze Savings For Iraqi Households
2026-09-01 Shafaq News- Baghdad For many salaried Iraqis and retirees, a month's pay is largely spent the moment it arrives, leaving little room for savings or investment as rent, utilities, food and transportation take a growing share of household income.
Abu Ahmed, a Baghdad resident, said his salary is "gone as soon as I receive it," with rent, bills, food and transportation taking priority before any money can be set aside. What remains, he said, is too little to save in any meaningful way.
The timing of salary payments adds to the strain. Hassan Hadi, another Baghdad resident, said household expenses continue regardless of whether salaries arrive on schedule, with school fees, clothing, private generators, food and transportation consuming much of his income.
What The Essentials Cost
The pressure is reflected in the cost of basic goods and services. Regular gasoline is priced nationally at 450 dinars per liter, about $0.35, under decisions issued by the Council of Ministers.
Many Baghdad households also rely on neighborhood generators during outages in the national grid. The Baghdad Provincial Council sets monthly generator rates; in June 2026, it priced an ampere at 12,000 dinars ($9) for round-the-clock service, 8,000 dinars ($6) for night-only supply and 6,000 dinars ($4.60) in privatized areas linked to the national grid.
Against those costs, Iraq's statutory minimum wage has remained at 350,000 dinars a month, about $269, since a 2017 cabinet decision. That is about 30% below the roughly 500,000 dinars ($385) that labor unions cite as an estimated monthly poverty line.
Education can add substantially to household expenses. Annual fees at Iraq's private colleges range from about 1.2 million to 8 million dinars ($920 to $6,150), rising above 10 million dinars ($7,690) for some medical and dental programs, according to government figures.
A Low Rate Of Saving
Mudhhir Mohammed Salih, financial adviser to the prime minister, told Shafaq News that Iraq's gross national savings average 12% to 15% of GDP, with the rate fluctuating according to oil prices, income, consumption and investment.
Using a measure focused on individuals rather than national savings, economist Hilal al-Taan said about 9.7% of Iraqis saved money in 2024, well below the global average. He attributed the low rate to limited incomes, high spending on food and housing, weak confidence in banks and rising living costs.
Inflation And The Shrinking Dinar
Najm Abdul-Tarish, an academic at the University of Dhi Qar, said much of a household's income goes toward housing, education and healthcare, while inflation erodes the dinar's purchasing power. In practical terms, the money in a worker's pocket buys less even when its face value remains unchanged.
"Higher inflation can therefore erode savings while raising household expenses, putting additional pressure on both saving and investment," Abdul-Tarish told Shafaq News.
Exchange-rate pressures add another dimension. While the Central Bank of Iraq sets the official rate at 1,300 dinars to the dollar, the currency has traded weaker on the parallel market. In May 2026, $100 sold for about 153,750 dinars in Baghdad, equivalent to roughly 1,538 dinars to the dollar, according to exchange-shop data.
Cash Outside The Banks
Salih said a large amount of cash circulates outside Iraq's banking system, although he cautioned that money held outside banks should not be treated entirely as savings because much of it is used for everyday purchases, trade and other transactions.
Moving a larger share through banks could strengthen their capacity to finance economic activity, he said.
"A larger share of savings moving through banks would strengthen their ability to mobilize domestic resources for lending and investment," Salih said, pointing to the need for better banking services, greater public confidence in financial institutions and wider use of electronic payments.
Central Bank figures illustrate the challenge. Total deposits at operating banks fell from 133.50 trillion dinars ($102.7 billion) in 2023 to 122.88 trillion dinars ($94.5 billion) in 2024. Over the same period, bank credit increased from 95.66 trillion dinars ($73.6 billion) to 102.24 trillion dinars ($78.6 billion), increasing the importance of attracting deposits to support lending.
Economist Dhergham Mohammed Ali linked weak savings to the limited use of banks, calling for wider adoption of electronic payments and more point-of-sale terminals and cash facilities across retail businesses and transportation.
By the CBI's latest reading, currency in circulation totaled 111.189 trillion dinars ($85.5 billion), of which 101.966 trillion dinars ($78.4 billion) circulated outside the banking system — about 91.7% of the total.
That does not mean the money represents untapped household savings; much of it finances everyday transactions. But the scale highlights the challenge facing Iraq's banking sector: drawing more economic activity into formal financial channels while many households have increasingly little income left to save.
https://www.shafaq.com/en/Economy/Living-costs-squeeze-savings-for-Iraqi-households