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Central Bank Governor Ali Al-Alaq confirmed that the three-year budget "included very large expenditures and a high deficit," noting that the issue of removing zeros from the dinar may witness developments in the coming period.
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On the sidelines of Al-Alaq's participation in the Duhok Conference on Economic and Financial Problems in Iraq and the Kurdistan Region, Al-Alaq said, "The budget for the three years included very large expenditures, which is why the deficit was high. However, there is ongoing coordination between the Central Bank and the Ministry of Finance to achieve a high degree of financial stability."
He added, "The issue of removing zeros from the Iraqi currency is an ongoing project that is being planned, and we may hear developments regarding it in the coming period."
He pointed out that, "With the renewed proposal for the zero-removal project, which is currently being prepared, the currency denominations will be restructured in general, including the 20,000 denomination."
The governor of the Central Bank of Iraq (CBI) said Wednesday there are no obstacles in the way of withdrawing oil revenues from US banks, amid recent reports that Washington has sanctioned tens of Iraqi banks due to alleged violations involving illegal dollar transactions.
"There are no obstacles or barriers," Ali Alaq told Rudaw on the sidelines of the second scientific conference of the College of Administration and Economics at the University of Duhok. "We receive... US dollars daily and convert it directly to Iraqi dinars to meet the needs of the Ministry of Finance and pay those who are entitled to dollars in exchange for dinars."
Iraq's oil revenues are deposited in US banks, namely the Federal Reserve, for the purpose of stabilizing Iraqi dinar, management of inflation, and several other critical reasons. The practice originated after the 2003 invasion under UN and US oversight.
In August, Iraq Observatory reported that 35 of the 72 banks currently operating in Iraq have been sanctioned by the US due to alleged violations of illegal US dollar transactions.
Oil revenue is Iraq’s main source of income, and the federal government relies on oil sales to cover its costs and pay the salaries of its civil servants.
Iraq has generated an estimated revenue of $7.1 billion in August oil exports, reported the country's oil ministry.
Issues around budget deficiencies
In June 2023, Iraq passed a three-year budget that included a record $152 billion in spending, allocating 12.6 percent to the Kurdistan Region.
"The three-year budget contains significant expenditures, which is why the deficit has increased," Alaq warned, adding there is, however, "coordination between the Ministry of Finance and the Central Bank to ensure greater financial stability."
He added there are "plans being implemented in coordination between the government and the Central Bank to establish a foundation for financial sustainability that will not face shortages and problems.
"The programs that the government and Central Bank are working on include increasing non-oil revenues to protect against the shocks that hit Iraq's economy.
"I believe there will be significant progress on this matter in the future. Financial sustainability is an important and fundamental goal that we are all working on."
Under Iraq's three-year budget plan for 2023-2025, it was decided that the federal government’s revenues and expenditures would follow a set framework, with the finance ministry preparing an updated revenue and expenditure table each year for parliamentary approval.
However, the 2025 budget table has yet to be submitted to Parliament. In practice, even when such tables are prepared, the figures often differ significantly from actual revenues and expenditures, as seen over the past two years.
Removing zeros from currency
Last week, the CBI announced plans to remove zeros from dinar, as part of efforts to strengthen the national currency.
"The matter of removing zeros from the Iraqi currency is a project that still exists and is ongoing. We are planning for it, and in the future we will see progress on this matter," Alaq said.
Iraq’s national currency, the dinar, has recently demonstrated strong signs of recovery, with the market rate steadily approaching the official exchange rate of 1,320 IQD to the US dollar. After a turbulent period of volatility and speculation
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