Central Bank Governor's Resignation: Admission of Failure or Escape from the Repercussions of the Financial Crisis?
The Governor of the Central Bank of Iraq, Ali Al-Alaq, submitted a request to relieve him of his post to Prime Minister Mohammed Al-Sudani, amid a series of issues and problems in the financial and banking sector in Iraq, which include the failure to control the dollar exchange rate on the black market.
The video for this blogpost is below here:
An informed source revealed to Al-Mustaqilla today, Tuesday, that Al-Alaq decided to submit his resignation after facing multiple problems in the financial sector, in addition to his inability to fulfill his promises to control the exchange rate. This request comes at a sensitive time for the Iraqi economy, which suffers from severe fluctuations in exchange rates and direct impacts on the local economy.
The main reasons that prompted Al-Alaq to submit his resignation are related to the ongoing difficulties in managing the financial and banking sector, in addition to the major challenges in controlling the dollar exchange rate on the black market. Since taking office, Al-Alaq has made many promises to achieve financial stability, but he has faced great difficulties in implementing them, which has led to increasing pressure on him.
A document obtained by Al-Mustaqilla today, Tuesday, revealed that the Speaker of Parliament has agreed to host the Governor of the Central Bank, Ali Mohsen Al-Alaq, by the Parliamentary Integrity Committee. This hosting aims to discuss the challenges facing the Central Bank and investigate the reasons that led to the request for his resignation.
Al-Alaq’s resignation could raise questions about the future of financial policy in Iraq. The central bank is central to economic stability, and any change in its leadership could have a significant impact on financial markets and confidence in the banking system.
Iraq faces major economic challenges that require strong and qualified financial leadership. The most prominent of these challenges are:
- Controlling the exchange rate: Iraq needs effective policies to control the dollar exchange rate and prevent speculation that leads to sharp fluctuations.
- Banking system reform: Improving the efficiency and transparency of the banking system to keep pace with international standards.
- Combating corruption: Promoting integrity and transparency in financial institutions to prevent corruption and restore investor confidence.
- text:
To / Governor of the Central Bank / Office of the Governor
M/ Oral parliamentary question
good greeting.
Based on Article (61/Seventh (1) of the Constitution, and Articles (27) Second) and (29) of the House of Representatives and its Formations Law No. (13) of 2018, and based on Articles (50) and (51) of the internal regulations.
House of Representatives. We refer to you the parliamentary question addressed by Mr. Representative Dr. (Hadi Hassan Al-Salami) to answer it orally in the presence of the Governor of the Central Bank at the House of Representatives session, and the date will be determined later according to the period specified in the legal articles. Media
with respect
For coordination purposes, please call (07713807778).
Attachments.
All primitives.
Safwan Bashir Younis
Advisor to the Banking Association calls for implementing the Prime Minister’s decisions to support private banks and lift US restrictions on them
link
The advisor to the Iraqi Private Banks Association, Samir Al-Nusairi, called for implementing the seven decisions issued on 4/4/2024 in implementation of the directives of Prime Minister Mohammed Shia Al-Sudani, regarding supporting our private banks, which confirms the government’s vision in its governmental program for financial and banking reform,
as well as activating and accelerating the implementation of the agreements that were reached in the rounds of negotiations between the Central Bank and the US Treasury in Washington and Baghdad to lift US restrictions on the use of the US dollar because the continuation of the current situation harms our national economy.
Al-Nusairi explained that the decisions of the Prime Minister supporting private banks outlined the executive procedures for comprehensive reform of the banking sector, which constitutes the basis and real beginning of the accomplished economic reform. These decisions included the following:
1- Preventing monopoly in banking services.
2- Activating the Central Bank’s financing initiatives.
3- Increasing cooperation between private banks and the Central Bank in discussing decision-making related to supporting and developing banking work.
4- Determining the contribution of foreign capital to Iraqi banks.
5- Participation of government institutions and financing funds with private banks and expansion by opening branches in other countries.
6- Support from the government and the Central Bank to private banks in foreign institutions and banks.
7- Increasing the Iraqi state’s reliance on private banks and activating the deposit of government deposits and government bank deposits with private banks.
Al-Nusairi stressed that the implementation of the decisions, which came as a result of an in-depth study by the Ministerial Council for the Economy, in the presence of the Central Bank of Iraq, of the challenges facing private banks, especially after 28 private banks were subjected to US Treasury restrictions by stopping their dealings in US dollars in foreign transfers, are practical applications to encourage private banks to develop their internal and external banking operations in a way that contributes to economic reform,
pointing out the importance of the Central Bank accelerating the procedures to rehabilitate and restructure these banks, as well as the necessity for the international auditing company to complete its agreed-upon work in order to lift the imposed restrictions and limitations.
He explained that this file is certainly the focus of the government, the Central Bank, the Iraqi Private Banks Association and the banking sector in general, hoping that efforts will succeed in creating new balanced relations with the American side in the field of organizing and developing clear foundations for both parties in banking relations in accordance with international standards.
Banks of "powerful politicians" affect exchange rates, Iraq faces "international pressure"
Professor of International Economics, Nawar Al-Saadi, revealed today, Monday (August 5, 2024), that there are political motives behind the Central Bank’s ignoring of some decisions of Prime Minister Mohammed Shia Al-Sudani.
Al-Saadi told Baghdad Today: “It seems that Prime Minister Mohammed Shia al-Sudani is facing great difficulties in enforcing his directives to the Central Bank, and these difficulties are evident in several aspects, including that the Central Bank is suffering from severe external pressures, especially from the US Federal Reserve, which imposes sanctions and places restrictions on financial transactions, which complicates the bank’s ability to implement effective monetary policies.”
He explained that "the Central Bank of Iraq faces a set of obstacles that directly affect its ability to implement the Prime Minister's directives. The first is the great international pressure coming from the US Federal Reserve, which imposes sanctions on some Iraqi banks and places strict restrictions on the movement of the dollar. These pressures make it difficult for the Central Bank to take effective steps to manage the exchange rate independently. The second is that the bank suffers from internal structural problems such as corruption and mismanagement, especially with regard to selling the dollar. These challenges make it difficult for the government to achieve its economic goals regarding the stability of the exchange rate, and increase the complexity of the Iraqi economic scene in general."
Al-Saadi stressed that “these problems make it difficult to implement monetary policies effectively, as financial resources are used for illegal purposes or are wasted due to corruption. Third, the influence of some banks owned by parties with great political and security influence plays a role in complicating matters, and these banks may be resistant to the changes imposed by the Central Bank, which limits the bank’s ability to impose the measures required to achieve financial and monetary stability.”
The professor of international economics continued, "There are political motives behind the Central Bank's disregard for some of Al-Sudani's decisions, and given the overlap between politics and economics in Iraq, this situation has become a syndrome in the Iraqi regime from after 2003 until now, as there is an influence from political interests that play a role in determining economic policies."
Al-Saadi concluded by saying, “The impact of these political interests may lead to a conflict between the government’s objectives in stabilizing the exchange rate and the executive decisions of the Central Bank. This overlap may contribute to exacerbating economic crises and increase the complexity of the government’s efforts to achieve financial stability, which makes the situation more complicated and affects the results of the economic policies pursued by the government.”
Parliament returns the oil and gas law to the government: It must add paragraphs that keep pace with global developments
The Parliamentary Oil and Gas Committee has returned the draft oil and gas law to the government and is awaiting its return to the House of Representatives, after amending paragraphs in it and reaching political consensus on it.
Committee member, Dhurgham Al-Maliki, said in a press statement that “the oil and gas law is currently outside the halls of the House of Representatives after it was returned to the government,” noting that “the committee is studying the law in detail to achieve the political agreement.”
He explained that “the government must work on amending and adding new paragraphs to the law that keep pace with the tremendous development in the global oil field and then send it to the House of Representatives,” explaining that “political differences still exist and that is why it was not voted on.”
Federal Supreme Court rejects lawsuit regarding US troops remaining in Iraq
The Federal Supreme Court rejected, on Monday, a lawsuit regarding the continued presence of US forces in Iraq, due to lack of jurisdiction.
The lawsuit was filed by MPs Basem Khashan and Mustafa Sand against the Prime Minister and the President.
The two representatives in the lawsuit request that the defendants’ agreement to allow American forces to remain on Iraqi territory be ruled invalid, and that it be cancelled, and that they be obligated to restore the areas and facilities exploited by American forces after the expiration of this agreement, as well as to demand compensation for the damages resulting from the operations that took place after the expiration of this agreement and from the exploitation of Iraqi areas and facilities during the period from 11/1/2009 until the date of their handover to the Iraqi government.
Morning articles TUE AUG 6 24
The national currency is fluctuating.. Expert: We need a banking system that creates balance
The dollar price has witnessed a significant increase recently, with a difference of 20 thousand dinars from the official price, amid the absence of any real solutions to control it and limit its rise.
In this regard, banking and financial researcher Mustafa Hantoush confirmed to Iraq Observer that “the issue of currency stability and exchange rate is determined according to monetary policy, which is represented by several axes, the most important of which is that the dollar and other foreign currencies are owned by a number of foreign countries.”
He added, "At the same time, Iraq has policies and understandings with these countries, such as the United States. The issue of trade with countries such as Iran and Syria must be done according to the platform," noting that "this trade is huge and must be financed according to a specific method through buying gold, making transfers, or importing goods so that there is an understanding with these countries."
He continued, "Today, the United States prohibits dealing in dollars in official trade, so how can this trade be financed at a time when it is not permitted to deal in dinars that are denominated in dollars? The issue of the platform with Iran and Syria, this issue may increase American momentum and reduce tensions, and thus stabilize the currency."
He pointed out that “to support and strengthen the national currency, there must be a basket of currencies that needs a banking system. Today, the banking system is due to the mistake made by the Central Bank of Iraq regarding the lack of a platform system with countries such as Iran and Syria since the first day, unlike countries in the region such as Turkey and others that have created a gold and remittance platform, where the banking system was stopped and restricted from the dollar and destroyed with quasi-sanctions, which created a banking problem, and then banks were introduced for foreign investors with another mistake.”
The banking and financial researcher wondered, “How are Iraqi banks given to foreign investors?” This matter led to these investors transferring dollars to their bank branches in their countries to an account in Citibank and JP Morgan, and their profits will be in huge amounts transferred to foreign countries. The issue has become a threat to Iraq’s sovereign financial security.”
He explained that “Iraq needs to build a banking system that strengthens banking standards and thus Iraq can build a banking system that provides a balance for the currency. The issue of people is not as important in monetary policies as the policies themselves, because if a certain person follows the same policies and does not have any plan, he cannot be benefited from. Rather, there must be a plan related to monetary policy to achieve a balance in the currency and the banking system, financing plans, attracting deposits, and plans related to granting loans. Whoever has banking policies will be the most suitable.”
Industry: Our production is trusted by government agencies and citizens
The spokesperson for the Ministry of Industry, Dhuha Al-Jubouri, confirmed today, Monday, the development of an integrated strategy to support local industries, especially strategic ones, and the rehabilitation of a number of important factories. While she detailed them by name, she confirmed the conclusion of successful partnerships with international companies to support the national industry, noting that the ministry's production enjoys the confidence of government agencies and citizens.
Al-Jubouri told the Iraqi News Agency (INA): "The ministry has developed a well-thought-out plan since Minister Khaled Batal Al-Najm assumed his duties in the current government, focusing on important strategic industries that include the sulfur, phosphate and fertilizer industries and presenting their projects in partnership with the private sector through conferences in which the ministry announced investment opportunities." She
added, "The ministry has 294 factories, not 4,000 as rumored, 104 of which are closed. A committee was formed to study the reality of these closed factories and concluded that most of them are very old factories and there is no point in rehabilitating them, while others were rehabilitated in partnership with the private sector."
She continued, "The most important factories that have been rehabilitated is the Babylon Tire Factory, which has been reinforced with modern and advanced machines and production lines and now produces tires for saloon cars, trucks and tires for agricultural machines."
She pointed out that "the Qaim Cement Factory, which is now producing resistant cement, has also been rehabilitated. Also, the first line for producing urea fertilizer has been rehabilitated to support the first production line that had been stopped for years and was rehabilitated in partnership with the private sector with a capacity of 100,000 tons per day of urea fertilizer."
She explained, "The iron and steel factory in Basra, especially the rolling mill, was rehabilitated and operated with purely governmental efforts, as well as the continuous casting factory in the General Company for Steel Industries, which had stopped for many years and was rehabilitated in partnership with the private sector to produce iron rods used in the raw material for reinforcing steel, as well as the Diyala Electrical Industries Company factory."
She pointed out that "the demand from ministries and citizens is good for the production of these factories, as the Ministry of Electricity uses transformers from Diyala Company, which are produced according to the specifications of Japanese Mitsubishi, as well as smart meters. We also have cables of various capacities produced by the Ur General Company in Dhi Qar Governorate, and citizens also prefer the production of these companies, which are known for their quality."
Al-Jubouri stressed that "the ministry has entered into important partnerships with international companies to support the national industry, one of which is with the American company Vale to produce agricultural sprayers under the (Rafidain) brand, which farmers have confirmed to us of its quality and ability to double work, which has greatly supported production," noting that they prefer it to imported sprayers.
She added, "We have a successful partnership with the international company Lafarge to reproduce the local resistant cement known for its quality, which has enabled us to meet local needs, and we have many partnerships that support local industry."
Etihad Credit Insurance signs Iraq Cooperation Agreement
Etihad Credit Insurance (ECI), the UAE Federal export credit company, signed a cooperation agreement with the International Development Bank (IDB), the largest banking network in Iraq, to support the 'Xport Xponential' initiative.
By signing the agreement, the bank will join the list of partners of the 'Xport Xponential' initiative, launched by ECI in May with the goal of empowering UAE-based companies that operate in the industrial, export, and re-export sectors.
Her Excellency Raja Al Mazrouei, CEO of Etihad Credit Insurance, said:
"This partnership represents a valuable addition to the 'Xport Xponential' initiative, as it supports both parties in their efforts to facilitate trade and economic activities of businesses based in the UAE. It also gives us great pleasure to announce that the International Development Bank, the first Iraqi bank with operations in the UAE, will be joining the initiative. We are confident that our mutual cooperation will further improve trade relations between the two nations."
Dr. Ziad Khalaf Abed Kareem, Chairman of the Borad of International Development Bank, stated:
"We at the International Development Bank are committed to further strengthen our presence and contributions to the UAE's and the region's trade and export landscape and helping build trade channels between the UAE and Iraq markets. Our goal is to use this partnership to encourage businesses in both nations to capitalise on this revolutionary initiative and expand their export and trade operations into previously untapped markets."
As one of the partners in the 'Xport Xponential' initiative, the International Development Bank will now offer additional funding opportunities for export and re-export companies in the UAE. The agreement further advances the development of credit solutions by providing businesses with access to the markets of Iraq and CEPA countries.
The agreement also emphasises the strategic partnership between the two countries, and promotes trade and export routes that link them, especially since the UAE-Iraq trade volume exceeds USD 27 billion annually. Notably, the International Development Bank has contributed at least10 per cent of the yearly trade between the two nations in just its first two years of operation in the United Arab Emirates.
Through this agreement, the International Development Bank now joins a number of federal and local entities, including the Abu Dhabi Department of Economic Development (ADDED), Khalifa Fund for Enterprise Development (KFED), Department of Economy and Tourism in Dubai, Dubai Airport Freezone (DAFZ), Sharjah Chamber of Commerce and Industry (SCCI), Ajman Economic Development Department, Ras Al Khaimah Economic Zones (RAKEZ), and Fujairah Department of Industry and Economy (IEDFUJ), as partners of the 'Xport Xponential' initiative. The list also includes financial institutions such as the Emirates Development Bank (EDB), Abu Dhabi Commercial Bank (ADCB), First Abu Dhabi Bank (FAB), Dubai Commercial Bank (CBD), Ajman Bank, The National Bank of Ras Al Khaimah (RAKBANK), and Fujairah National Bank (NBF).
The power of the "Federal Forces"... Iraq is moving to achieve financial autonomy
The United States of America still dominates the Iraqi economy through economic agreements concluded by Washington according to what primarily serves its interests, as the American administration seeks to block the way for those trying to rid the country of its control over Iraqi oil sales funds.
The United States of America continues to impose its influence on Iraq in many vital files, including depositing the funds from the sale of Iraqi oil in the US Federal Bank, amid clear blackmail by passing many files, most notably the dollar bill, which puts great pressure on the government.
Iraq seeks to get rid of this dominance by depositing the money in the Federal Bank and sending it directly to the Central Bank.
Speaking about this file, Al-Fatah Alliance member Ali Hussein calls on the government to seek to find alternatives and take the step of liberating the country from the dominance of the dollar and the continuing American sanctions, while stressing that Iraq's move towards lifting the restrictions of the US Federal Bank is a must.
Hussein said in an interview with the Maalouma Agency, “It will be a bold step, but it will succeed if the atmosphere is created and contracts are made with alternative international banks,” noting that “it is necessary to bring in companies from international countries.” that do not deal in the US dollar.”
He continues, “Entering into the Shanghai system and other global organizations will be the first stage of liberation from the dollar,” adding that “the movement to end the dollar’s hegemony over the world, led by major countries, has greatly succeeded.”
He adds, “Contracting from companies from Eastern countries and bringing them to work inside Iraq will avoid the economic blockade,” pointing out that “the government is required to seek to find alternatives and take the step of liberating the country from the dominance of the dollar and American sanctions."
The power of the "Federal Forces"... Iraq is moving to achieve financial autonomy
In addition, former Finance Committee member Muhammad Al-Shabki accused Washington of dominating the oil revenues in the US Federal Bank.
Al-Shabki said in a statement to the “Al-Ma’louma” agency, “There are issues imposed on Iraq and dominance over the Iraqi economy by the United States,” noting that “this policy that America placed on Iraq is the reason for the calamity in its economic situation.”
He adds, “Iraq does not have autonomy over its money coming from oil exports in the US Federal Bank,” calling on the government to “free itself from this pressure and have a say in reformulating the relationship with the Americans.”
He shows that "Iraq is asking the American side for a lot of money, which represents the proceeds of the amounts in the Federal Bank."
It is clear that America continues to use the Federal Bank as a means of pressure on Iraq in order to advance its interests, or obstruct financial movement that leads to an increase in the exchange rate of the dollar against the Iraqi dinar, or the country's mortgage capabilities by force unless the country's money is released from the federal prison.
Former MP: Iraq's financial autonomy is lost because of Washington
On Monday, former member of the Finance Committee, Muhammad Al-Shabki, accused Washington of dominating the oil revenues in the US Federal Bank.
Al-Shabki said in a statement to the “Al-Ma’louma” agency, “There are issues imposed on Iraq and domination of the Iraqi economy by the United States,” noting that “this policy that America placed on Iraq is the reason for the calamity in its economic situation.”
He added, “Iraq does not have autonomy over its money coming from oil exports in the US Federal Bank,” calling on the government to “be freed from this pressure and have a say in reformulating the relationship with the Americans.”
He stated that "Iraq is asking the American side for a lot of money, which represents the proceeds of the amounts in the Federal Bank."
Earlier, a member of the Al-Fatah Alliance, Ali Hussein, warned in a statement to the Al-Ma'louma Agency about the American control over the oil financial revenues in the Federal Bank, accusing Washington of exploiting this control to exert pressure on Iraq.
Financial expert diagnoses 'serious error' in Iraqi banking system
Financial expert Saleh Al-Masrafi confirmed today, Tuesday (August 6, 2024), that Iraq is among the highest countries in the Middle East in the file of hoarding money, while he diagnosed a grave error in the Iraqi banking system.
The banker said in an interview with Baghdad Today, "The accumulations that have continued for many years have pushed citizens to lose confidence in banks and resort to hoarding money in their homes," indicating that "its percentage reaches 70% of financial liquidity, and these are large numbers that indicate that we are among the highest countries in the Middle East in hoarding money."
He added that "hoarding money in the financial concept is a grave mistake that will confuse the financial process and reduce the government's ability to provide liquidity to pay salaries," explaining that "resorting to electronic payment is a step in the right direction, but the most important thing is withdrawing the liquidity, and there are several ways."
The banker pointed out that "the recent issuance of treasury bonds is a correct decision, but the media propaganda to create a culture of safe investment in the street is very weak, and this is what creates low rates of dealing with them, even though the interest rates are attractive."
He stressed the "necessity of seeking to expand the circle of withdrawing liquidity from homes and creating a movement of money that contributes to increasing the recovery of investment and granting government loans, especially with the presence of requests that exceed by 5 times the amount of money allocated for loans in any sector, especially housing."
It is noteworthy that the Parliamentary Finance Committee commented on Saturday (July 13, 2024) on the impossibility of lifting US sanctions on some Iraqi banks.
Committee member Moeen Al-Kadhimi said in an interview with Baghdad Today that "there is no weakness in Iraq's foreign policy and there is no defect in the Iraqi banking system that would prevent the United States of America from lifting sanctions on Iraqi banks."
Al-Kadhimi explained that "there is a clear intention by the United States of America to continue these sanctions despite the clear development in the banking system and the restriction of foreign transactions through the electronic platform in the Central Bank, but Washington is using this file as a political file towards Iraq."
He added, "The Iraqi government is doing everything it can to lift the sanctions on banks, especially since these sanctions have negatively affected the banking sector and contributed significantly to the dollar crisis."
Washington will postpone the response to targeting Ain al-Assad.. Security expert: We are waiting for the Iranian strike - Urgent
Security expert Ahmed Brisam said on Tuesday (August 6, 2024) that the United States of America is likely to postpone its response to the targeting of the Ain al-Assad base in western Iraq yesterday, Monday, which resulted in injuries among American soldiers.
In an interview with Baghdad Today, Brisam said, "The assassination of the head of the political bureau of Hamas, Ismail Haniyeh, is not a passing event, especially since it took place in the heart of Tehran, which makes the Iranian response to the attack on Tel Aviv an inevitable reality at any moment, and it will be at a higher pace than the previous attack, and this is what pushes the Middle East into a state of constant anticipation."
He added, "The attack on the Ain al-Assad base and the casualties among American soldiers is part of the regional tensions, but Washington will postpone its response for the time being for reasons most notably waiting for the Iranian response to the assassination of Haniyeh and what its results will be. In addition to that, the response will not be limited to Tehran, but will include the resistance factions in Iraq, Lebanon, Syria, and Yemen, which have important axes, which means that there are multiple scenarios for the next strike."
Brisam pointed out that "Washington is aware of the seriousness of the scene in the Middle East and is in a state of diplomatic and security alert in order to avoid an open war because it will be the biggest loser, especially with the declines in the financial markets yesterday and the resulting tremors of any war in a region rich in oil wealth, which is a strong shock that may paralyze the markets, including the American ones."
Ban said, "America's response to the Iraqi factions will depend primarily on the size of the next Iranian strike, but in any case, Washington wants to contain the situation as much as possible because it is approaching a sensitive election season, and the escalation of the situation could have serious repercussions in light of the ongoing conflict in Gaza and the possibility of it turning into a regional war is very likely."
Yesterday, Monday (August 5, 2024), the Ain al-Assad air base, west of Anbar Governorate, which includes American forces and international coalition advisors, was bombed by two missiles.
Meanwhile, an informed security source revealed that the operation to target the Ain al-Assad base was prepared with 5 missiles that were loaded on the launch platform on the wheel, but the platform failed to launch the remaining missiles.
Reuters quoted US officials as saying that at least five US soldiers were injured in an attack on a military base in Iraq on Monday.
One soldier was seriously wounded, the U.S. officials, who spoke to Reuters on condition of anonymity, said. The number of wounded was based on preliminary information and could change, they said.
Parliamentary Integrity "hosts" the Governor of the Central Bank (document)
A document obtained by Baghdad Today Agency, today, Tuesday (August 6, 2024), showed that the Parliamentary Integrity Committee obtained the approval of the Acting Speaker of Parliament to host the Governor of the Central Bank, Ali Mohsen Al-Alaq.
Below is the text of the document:
Al-Sudani: Local governments are important in implementing the government program
Prime Minister Mohammed Shia Al-Sudani received today, Tuesday, the governor of Diyala, elected by the provincial council, Adnan Jaer Al-Shammari.
Al-Sudani stressed the tasks of local governments and their importance in implementing the government program at the governorate level, as they represent the necessary executive arm alongside ministries and their institutions, and strengthening the oversight and legislative role through the work of the governorate council.
Al-Sudani pointed out the necessity of working with all national forces in the governorate in order to change the service, social and economic reality, and for the governorate's agencies to provide satisfactory performance that meets the citizens' aspirations and confirms the government's goals and priorities, in addition to addressing basic projects and infrastructure according to importance and in accordance with necessities that cannot be postponed.
Imposing guardianship on Zain Iraq Bank reveals the extent of the deterioration in the banking reality
The Central Bank of Iraq has placed Zain Iraq Islamic Bank under guardianship, in a move that reflects the bank’s unsound practices and unsatisfactory management performance, threatening the independence and integrity of the Iraqi banking system.
According to an official document obtained by Al-Mustaqilla, the decision of the Board of Directors of the Central Bank, No. 165 of 2024, was issued based on the provisions of Article 59 of the Iraqi Banking Law No. 94 of 2004. Jalal Abdullah Salman was appointed as a trustee of the bank, in accordance with the provisions of Article 60 of the same law, and he was granted the powers specified by this decision.
The banking reality in Iraq faces major challenges that negatively affect the stability of the financial system and investor confidence. These challenges include the mismanagement of some banks and their lack of transparency and good governance. The recent decision to impose guardianship on the “Zain Iraq Islamic Bank” reflects the weakness of the supervisory procedures and internal controls in this bank.
The Central Bank of Iraq is the body responsible for supervising the banking system and ensuring its stability. However, criticism is growing about the effectiveness of this oversight and its ability to detect and prevent financial violations in a timely manner. The decision to impose guardianship on Zain Iraq Islamic Bank indicates a delay in supervisory intervention, raising questions about the effectiveness of the preventive measures taken by the Central Bank.
Supervision of banks and the Central Bank should not be limited to them alone, but the Iraqi Council of Representatives should have an effective role in following up and monitoring financial and banking performance. However, the oversight role of the Council of Representatives often appears weak and ineffective, leaving the door open to more violations and unsound practices. The absence of parliamentary oversight contributes to the exacerbation of financial problems and undermines confidence in the Iraqi financial system.
In conclusion, the decision to impose guardianship on Zain Iraq Islamic Bank reflects the urgent need for radical reforms in the banking system and strengthening financial oversight by the responsible authorities. This requires joint cooperation between the Central Bank, banks, and the Council of Representatives to ensure the stability and safety of the financial system in Iraq .
Low oil prices threaten Iraq's economy: Does the government have a plan or will it wait and watch?
Economist Omar al-Halbousi confirmed that the drop in oil prices to $75 per barrel is putting Iraq under great pressure, especially since the 2024 budget was approved on the assumption that the price of a barrel of oil will be $80. Al-Halbousi warned that the continued decline in oil prices will lead to a major collapse and the government’s inability to pay salaries and run the state’s work.
Al-Halbousi said in a statement to “Al-Jarida” followed by Al-Mustaqilla today, Tuesday, “With the decline in global oil prices as a result of the red epidemic that hit global markets due to the incorrect strict policy of the Federal Reserve, which will lead the world to stagflation, which is more dangerous than the current inflation, oil prices have had their share of the significant decline, which made Brent crude lose all the gains it made for the current year. Consequently, oil prices reached $ 75 per barrel, which puts Iraq under very great pressure, especially since the 2024 budget was approved on the assumption that the price of a barrel of oil will be $ 80, which is a very exaggerated and non-precautionary price.”
At the same time, Iraq witnessed a significant decline in its oil imports for 2023 compared to 2022, reaching 19%, with the continued halt in Kurdistan oil exports. In addition to the expansion in public finances with increased expenditures and increased appointments, and the budget deficit exceeding 64 trillion dinars. All of this casts a dangerous shadow over Iraq, and if oil prices continue to decline, this will greatly deepen the financial deficit by the end of the year, leading to a major collapse and the government’s inability to pay salaries and run the state’s work,” he added.
Al-Halbousi pointed out that “ the Iraqi government may resort to two things in light of this: increasing domestic borrowing to cover the deficit, which will cause an increase in the size of the domestic debt, which is already very high, and reducing investment spending in the 2024 budget, which may reach its elimination, noting that the size of investment spending constitutes 26% of the size of the budget.”
He explained that “the two steps above will be resorted to by the government in an attempt to save the Iraqi economy, but they are not a cure but rather a continuation of the financial disaster in Iraq, which is deepening with the decline in oil prices and the financial and banking sanctions imposed by the US Treasury, which are expected to deal a new blow to Iraq, in addition to the geopolitical conflict raging in the region. All these reasons and others put Iraq under stifling pressure due to the cumulative mistakes in dealing with the economy and money in Iraq and the absence of strategic planning for such intertwined events.”
Do America's economic interventions serve Iraq or threaten its autonomy?
The US Ambassador hosts a group of Iraqi businessmen
The US Ambassador to Iraq, Alina Romanowski, confirmed that the United States hosted a group of Iraqi businessmen who traveled to the United States to participate in the “SelectUSA” investment summit.
The controversial ambassador within Iraqi circles said in a tweet she posted on the X platform (formerly Twitter) , that the aim of this participation is to listen to their experiences and learn how the United States can help in the growth of their businesses. Stressing that the United States is committed to helping Iraq diversify its economy and strengthen its private sector.
Although this initiative appears on its face to be a positive step to support the Iraqi economy , it has not been free from criticism and questions about the intentions of the United States and its continued interference in Iraq's internal affairs. Many observers and analysts believe that such initiatives may be a cover for deeper interventions that may affect Iraqi autonomy.
Hence, questions are increasing about whether the Iraqi authorities will take measures to protect its autonomy and independence. Will the Iraqi businessmen who participated in this summit be summoned for investigation and to find out what happened between them and the ambassador? Will the Prime Minister intervene and direct government agencies to monitor the actions of the American Ambassador and prevent any interference that may affect Iraqi autonomy?
It is clear that there is an urgent need to clarify whether these initiatives actually aim to support the Iraqi economy in a fair and transparent manner or whether they seek to achieve other interests that may conflict with the independence and autonomy of Iraq. The question remains about how to achieve a balance between benefiting from international support and protecting national autonomy in light of the ongoing tensions over the American role in Iraq.
Prime Minister's Advisor: Oil price indicators remain stable despite global economic fluctuations
Advisor to the Prime Minister, Mazhar Muhammad Salih, stressed today, Tuesday, the importance of caution and economic preparedness regarding the fluctuations witnessed by the American economy and their repercussions on the global economy, especially on energy markets, noting at the same time that oil price indicators are still stable despite these fluctuations.
Saleh told the Iraqi News Agency (INA): "A few days ago, economic circles in the world were surprised by sharp fluctuations and declines in the US stock market amid a wave of panic over fears of a possible recession in the world's largest economy, the US economy, as the main financial indicators witnessed a decline, including the Dow Jones Industrial Average for major US industrial companies, by about 1,000 points at once."
He added, "These declines were based on a combination of local and global economic factors that led to a weakening of investor confidence in the performance of the US economy, especially since the US employment or jobs index indicates a trend towards unemployment with an expected decline in GDP growth. If the situation continues for six consecutive months, the recession will turn into a major depression that will hit all economies of the world."
Saleh continued, "The VIX volatility index is currently witnessing a sharp rise, which means that investors are losing confidence in the future of the US economy, and that financial market traders are moving towards short positions, i.e. selling stocks at their current prices before they deteriorate to allow repurchase at lower prices, or what is called long positions in the future, within the downward financial assets cycle. In general, financial markets interact with the convergence of real economic indicators and geopolitical developments in the Middle East, Ukraine and other regions of the world, which causes widespread concern and major movements in the instability of the global financial market."
He pointed out that "what matters to Iraq is the current position of energy markets and global demand for crude oil, whose indicators are still relatively stable, as previous expectations found that the global oil market is represented by rising prices, in light of strategic adjustments in production by OPEC+, especially amidst varying regional economic and political developments."
Saleh pointed out that "the US Energy Information Administration had previously announced that it expects average prices to reach about $89 per barrel of oil for the rest of 2024, but there has been a gradual decline in global oil prices starting four days ago and coinciding with the decline in the value of financial assets in the US markets, especially the decline in benchmark oil (Brent crude), which is currently trading at about $76 per barrel for futures contracts after reaching about $88 per barrel last June, which requires more caution and economic preparedness."
Four Reasons Why China Is Cautious About Iraq’s ‘Development Path’
Iraq has a mixed bag of geography: It sits at the crossroads of Asia and Europe, and is bordered by Saudi Arabia and Iran, two major regional powers. But despite its vast oil reserves, Iraq’s coastline of just 36 miles (58 kilometers) limits its direct access to international waters. To export energy, Iraq relies on shipping its Arabian Peninsula oil through the Persian Gulf, the Red Sea and the Suez Canal to the Mediterranean.
This makes peace in the surrounding waters and good relations with neighboring countries crucial to Iraq’s economic lifeline. To expand trade and diversify its economy, Iraq is planning to develop a 1,200-kilometer “Development Road,” a dual corridor combining rail and road transport. It starts at the port of Faw on the Persian Gulf, passes through Basra and the oil-rich areas, and extends north to the Turkish border.
With the support of Iran and Turkey, the project aims to create an alternative Eurasian route, bypassing the Suez Canal and complementing the India-Middle East-Europe Economic Corridor (IMEC) under construction. Successful implementation of the “Development Road” project will undoubtedly boost local employment opportunities, facilitate cross-continental trade, create special economic zones and new cities focused on green development, and thus support a new reality of economic leverage and non-oil projects.
However, the development road project faces a number of security and economic challenges. Decades of war have combined to weaken Iraq’s political cohesion. Because the “development road” will be a potential corridor for Eurasian trade, the free flow of goods must be guaranteed through a strong security structure. Who will provide such security guarantees? Who will ensure the continued political will to implement such a massive project across successive leaderships and administrations? Moreover, the future success of the development road depends on strong trade growth between Asia and Europe, especially between China and Europe. However, the current trade divide between the West and China has led Europe to begin implementing tariff plans on some Chinese products, most notably Chinese electric cars, and to shift manufacturing and trade supply chains away from China to other Asian countries. The volume of goods traded between China and Europe is not expected to grow significantly in the coming decade. This is problematic because the development road relies on high trade volumes to offset construction and operating costs, and the decline in trade between the two regions does not bode well for the financial viability and economic sustainability of such a massive infrastructure project.
Development Road as a Complement to the Belt and Road Initiative
Many wonder whether Iraq’s development path is an alternative to China’s Belt and Road Initiative (BRI). The BRI aims to modernize Eurasian trade by creating infrastructure links and trade corridors that did not exist before. Indeed, today’s Eurasian continental railway networks connect trade from China’s eastern coast through Central Asia to Western Europe. The BRI also connects land corridors from southwest China to Pakistan’s Gwadar port, where goods traded via the Suez Canal sail to Western Europe. Because “all roads lead to Rome,” there is no exclusive route, so with a potential transport corridor between Iraq and Turkey, Chinese goods could be shipped from Pakistan’s Gwadar port directly across the Persian Gulf to Iraq’s Faw port. This would make Chinese shipping faster and cheaper than similar goods exported by its global competitor, India, and thus provide a significant advantage for China.
But the “development route” has another contender. The India-Middle East-Europe Economic Corridor (IMEC) is equally ambitious, but led by the United States and its regional allies. This multimodal transport corridor aims to boost trade links between India, which is emerging as a global trading hub; the United Arab Emirates and Saudi Arabia, which have large trade surpluses and are undergoing major economic transformations; Israel, a key U.S. ally and global technology leader; and Europe, the final consumer market. Given India’s growing importance in global manufacturing and the economic integration of participating countries, the India-Middle East-Europe corridor is poised to create a new paradigm for global trade.
Almost in parallel, the Development Road and the India-Middle East-Europe corridor will come into direct competition. In the current geopolitical landscape, the India-Middle East-Europe route is best designed to facilitate trade from India to Europe, while the Development Road will primarily support trade from Russia and China.
China cautious about Iraq's 'development path'
Over the past decade, China has amassed the world’s most advanced expertise in infrastructure and urban engineering. We have seen the impact of this in the construction of Egypt’s new administrative capital in the middle of the Sahara Desert in record time, and in the tunnels and skyscrapers of NEOM, the futuristic city in Saudi Arabia, which are living proof of China’s engineering achievement.
China has not been absent from actively participating in Iraq’s post-war reconstruction. It is the largest builder of power plants in Iraq, providing more than 6,200 megawatts of capacity, including the Basra power plant. Chinese companies have developed oil and LNG facilities, water treatment plants, airports, and schools. China is also Iraq’s largest trading partner, and the two countries have elevated their diplomatic relations to a strategic partnership.
The financial feasibility of the project is uncertain, as the original budget for the construction of the Faw port was raised when it was built and its completion date was delayed to 2025.
However, despite being a vital partner in infrastructure and trade, it has taken a cautious stance on Iraq’s $17 billion “Development Road” initiative for four main reasons:
First, the project faces a potential problem due to differences in construction and engineering standards. South Korea’s Daewoo won the $2.6 billion construction contract for the Faw deep-water port, the starting point of the “Development Road,” while European companies conducted most of the initial feasibility studies for the “Development Road.” The differences in construction and engineering standards between the West and China are likely to add to the project’s costs and delays.
Government inefficiency and corruption will hinder implementation.
Second, the financial viability of the project is uncertain. The original budget for the construction of the Faw port was raised when it was built and the completion date has been pushed back to 2025. The current “development road” plans include building fifteen stations along the route, a massive undertaking. And China is not convinced that government oil revenues will be enough to cover the financing needed to build a dual rail and road transport system across Iraq.
Third, political and security risks surrounding the mega-infrastructure project remain. Government inefficiency and corruption will hamper the implementation of such a mega-project, and rent-seeking will hamper the plan’s implementation, which requires transparency and accountability in the work of regional governments. Instability within the government, particularly violent extremism in the Kurdistan Region, where the development route passes, could paralyze transportation along the route if violence breaks out.
Fourth, China is not enthusiastic simply because it has alternatives. In June, China, Uzbekistan, and Kyrgyzstan agreed to build a railway linking Kashgar, in Xinjiang, with eastern Uzbekistan via southern Kyrgyzstan. The new $5 billion railway will connect with existing rail networks in Turkey and Western Europe. The new land corridor from western China to Western Europe will bypass both geopolitically contentious Russia and the Red Sea, a major breakthrough in Europe-Asia transport infrastructure. Compared with the Iraq-Turkey route, this alternative appears to be more financially feasible, less geopolitically disruptive, and more manageable once construction is complete.
Finally, the assumption that China will automatically support the “development path” because of its growing trade and investment ties with Iraq and its declared alignment with the global South may not be entirely correct, as it seems.
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