Exchange Rate Control: The Central Bank’s Next Chapter

A government advisor stated that monetary policy requires a flexible dual framework to balance price stability and economic growth.

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The Prime Minister for Financial Affairs, Mazhar Muhammad Salih, indicated that the monetary policy adopted by the Central Bank of Iraq faces a difficult equation with two directions, the first of which is controlling inflation and stabilizing the exchange rate, and the second is supporting economic growth, especially in light of the great dependence on oil and the volatility of its prices.

Saleh told Al-Furat News Agency that “achieving this balance between price stability and GDP growth requires the Central Bank to adopt a flexible dual framework in its monetary policy that focuses on price stability with thoughtful management of the exchange rate, without rigid fixing that restricts the absorption of shocks.”

He pointed out that the necessary steps require, first and foremost, controlling inflation, which necessitates using tools such as the monetary policy interest rate as a clear signal, and open market operations to sterilize excess liquidity during periods of oil surpluses. Furthermore, managing the exchange rate through measured interventions and building strong foreign reserves limits the spillover effects of oil and commodity price volatility into the domestic market.

Saleh explained that supporting economic growth through monetary policy is not achieved through uncontrolled monetary expansion, but rather through selective credit programs targeting non-oil sectors, such as agriculture and small and medium-sized enterprises (SMEs), thereby boosting supply and productivity. He added that deepening financial intermediation and expanding financial inclusion through digital payment systems reduces the informal financial market and dollarization, and strengthens the transmission of monetary policy to generate its effects, leading to increased economic activity in the real sector.

The financial advisor stressed that coordination between monetary and fiscal policy is crucial, as the central bank alone cannot absorb oil shocks, noting that the existence of a financial stability fund and flexible countercyclical spending rules helps to mitigate fluctuations in domestic liquidity.

In conclusion, Saleh emphasized that transparency, good governance, and communication with the public regarding the inflation target and the role of the exchange rate bolster confidence and solidify expectations across the economic spectrum. He explained that this combination of monetary sterilization, controlling excess liquidity in the economy, managing the exchange rate, supporting productive credit, and macroprudential measures against shocks can enable Iraq to maintain the dinar's purchasing power and curb inflation without sacrificing economic growth opportunities. He noted that a strategy of balancing stability and growth is possible but requires a prudent monetary policy, coordinated with global financial institutions and geared towards both long-term stability and sustainable growth.

A Sudanese advisor proposes solutions to address Iraq's internal debt.

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The advisor to the Iraqi Prime Minister for financial and economic affairs, Mazhar Muhammad Saleh, downplayed concerns about the size of Iraq’s internal debt, proposing a set of solutions to reduce this debt.

 

The Central Bank of Iraq had previously issued a statement on October 19, in which it stated that the planned deficit in the three-year general budget law approved by the House of Representatives for the years (2023, 2024, 2025) amounted to 191.5 trillion dinars, while the actual deficit for the three years mentioned amounted to 35 trillion dinars, which was covered internally by bonds and transfers and in accordance with the chapters contained in the budget law. 

 

According to the Central Bank, actual borrowing reached 18.2% of the planned deficit included in the budget law, reflecting the high level of coordination between the government and the Central Bank of Iraq in controlling public debt and preventing it from reaching the high levels stated in the budget law.

 

Iraq’s outstanding external debt does not exceed $13 billion after excluding (the outstanding and unclaimed debts of the former regime), and Iraq has not defaulted on any obligation, maintaining an excellent financial reputation regionally and internationally in this regard, according to the Central Bank.

 

The bank indicated that the ratio of public debt to GDP did not exceed 43%, and this ratio - according to the internationally recognized classification - is moderate and within safe limits and does not constitute a burden on the economy.

 

Increasing debt

 

But Mazhar Mohammed Saleh told Rudaw Media Network on Saturday (November 22, 2025) that "the whole issue of debt is related to internal debt, which is really increasing as the oil asset cycle declines."

 

He explained that "the announced figures for internal debts range around 90 trillion Iraqi dinars, and whenever the oil asset cycle decreases, these debts increase, due to their connection to oil prices to finance fixed expenditures within the budget."

 

Muzhir Muhammad Saleh asked: "Are there any solutions to this issue? Of course, there are realistic solutions and studies have been presented in this field, but there are solutions to transform this debt into a productive asset."

 

"Iraq possesses productive assets that are currently idle."

 

He pointed out that "the Iraqi state possesses productive assets, but they are idle and need to be activated," adding that "the studies currently being presented are about how to convert this internal debt into a productive asset, i.e., the process of exchanging debt for assets, especially since almost half of this debt is held in the investment portfolio of the Central Bank of Iraq."

 

He believed that "the Central Bank of Iraq, through a calm and intelligent monetary policy, could play a major role in the process of converting these debts into real assets, through cooperation with the Iraqi Development Fund or others."

 

Muzhir Muhammad Saleh noted that "the real assets are factories that have stopped operating, companies that are half-operated, and real estate assets worth billions of dollars. Therefore, the process will be twofold: paying off the debt while diversifying the economy through a partnership with the private sector. I consider this a blessing in disguise."

 

According to the Sudanese advisor, these solutions will lead to "diversifying the economy and creating a partnership with the private sector, thus extinguishing this debt, and then unraveling this duality between oil and public finance in one way or another," considering this to be "a sign of intelligence in economic, monetary, financial and development policy."

 

"Domestic debt is not a burden on the public."

 

Muzhir Muhammad Salih downplayed concerns about the debt, saying that "this internal debt is within the government banking system and is not a burden on the public," adding that "there are full preparations to act regarding this debt that has accumulated due to difficult circumstances that Iraq has gone through."

 

These circumstances are “the financial and security crisis during the time of fighting ISIS, the financial and health crisis during the time of Corona, and the financial and geopolitical crisis in the Ukraine war. So, the derivatives of the shocks that hit the Iraqi economy are outside its control and all of them are external and have hit the inside,” according to the Sudanese advisor.

 

He pointed out that "there is an economic trend to study and resolve this issue, in a way that ensures stronger development mechanisms, so that it becomes a means to achieve development goals and not a fear of debt that cannot be repaid, as if a predator were eating the national economy."

 

He stressed that "in exchange for this debt, there are enormous wealth and dormant activities that can be activated," according to him.

A highly anticipated US visit and Savaya's appearance at the Pentagon send strong messages about a "completely different phase" in Iraq.

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What does Washington have up its sleeve?

 

Baghdad is preparing to receive a high-level American delegation in the coming days, at a time that suggests Washington has decided to move from a phase of quiet observation to one of targeted intervention, coinciding with the redrawing of the power map after the elections. The visit comes as the controversy surrounding the surprise appearance of US Special Envoy Mark Savaya at the Pentagon has yet to subside, less than four hours after the same coordinating body announced its formation as the "largest bloc"—a move widely interpreted as a direct political message rather than a routine meeting.

Political sources confirmed to Baghdad Today that the American delegation's visit is not merely a protocol visit, but rather carries a clear position regarding the formation of the next government. Washington wants a stable and effective government that does not reflect parallel power structures. The US administration believes its political and economic support is contingent on Baghdad's ability to establish a governing framework that prevents armed groups from influencing executive decisions and ensures that the instruments of power remain solely in the hands of state institutions.

Behind these messages lies the issue of uncontrolled weapons, a central focus of the American approach. Washington believes the incoming government will face a direct test regarding the role of factions within the political process, the nature of their participation in governance, and the limits of their security influence. Diplomatic sources believe the United States wants clear commitments before fully recognizing the new government and may escalate pressure if it perceives the political equation as shifting toward a factional government with significant parliamentary influence.

The economic dimensions are equally, and perhaps even more, present than they appear on the surface. The US administration is preparing to revive major projects such as investment in Baghdad International Airport, which has returned to the forefront as a strategic project no less important than oil and energy. There is talk within US circles of a desire to develop the airport through operational and investment partnerships that would provide it with an advanced operational infrastructure and connect it to a broader network of commercial air transport. There is also a push to expand US investment in oil and gas fields and to develop the energy, transportation, and port sectors, as these are considered key to long-term economic stability in Iraq.

The appearance of Savaya within the Pentagon has given these files an added dimension. International relations expert Hussein al-Asaad, speaking to Baghdad Today, believes that placing the Iraqi file on the desk of the Secretary of Defense, rather than the State Department, reflects a shift in Iraq's focus from diplomatic discussions to direct U.S. national security concerns. Al-Asaad explains this shift as a result of growing anxiety in Washington regarding the future of foreign forces, the activities of armed factions, threats related to regional conflict, and the nature of the next government and the potential changes it might bring to the balance of power.

Al-Asaad points out that Savaya, with his economic background, represents a bridge between the security and investment sectors, making his presence at the Department of Defense a sign that Washington is now dealing with the Iraqi file as a complex issue that combines security, politics, and economics. From this perspective, the United States' aspiration to restructure its economic presence in Iraq is no longer separate from its security vision, but rather complements it.

As for the timing, diplomatic sources confirmed to Baghdad Today that publishing photos of the meeting just hours after the announcement of the "largest bloc" coordination framework was not a spontaneous move. According to these sources, Washington wanted to send a clear signal to the political forces that the formation of the next government would be under direct scrutiny, and that the United States would not be lenient with any political formula that weakens the state or opens the door to unchecked influence.

Observers believe that Iraq finds itself at a critical juncture with multifaceted dimensions. Political forces are moving towards forming a government that, thus far, appears to lean heavily towards the influence of armed factions. Washington is intensifying its messaging through the anticipated visit and the movements of the Savaya delegation. Economic issues are resurfacing strongly, from the airport to the oil fields to energy projects. And the regional environment is exerting significant pressure on the shape of future policies in Baghdad.

Between these overlapping circles, the next phase appears governed by a delicate equation: no governmental stability without calming the security situation, no international support without a clear economic vision, and no internal balance without redefining the boundaries of political and military influence. At the heart of this equation, the United States stands closer than ever to the government formation process, at a moment when the first outlines of the coming years are being drawn.

 

Planning: Private sector investments within the five-year plan will reach 84 trillion dinars.

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The Ministry of Planning confirmed on Friday that private sector investments within the five-year plan will reach 84 trillion dinars.

Ministry of Planning spokesperson Abdul Zahra Al-Hindawi told the Iraqi News Agency (INA) that "Iraq has already launched its Sustainable Development Vision 2030, which takes into account the fundamental Sustainable Development Goals agreed upon by the international community and reflects them in policies, programs, and development plans according to their phases." He pointed out that "the 2024-2028 five-year development plan covers almost the remaining period of Iraq's Sustainable Development Vision 2030 and includes goals related to health, education, poverty reduction, youth empowerment, partnerships, housing, and other 17 goals that are directly relevant to the Iraqi context."

He added, "These goals are translated into policies according to the five-year development plan and other strategies." He pointed out that "Iraq is now preparing to launch its third national poverty reduction strategy, which will cover the remaining five years of Iraq's Sustainable Development Vision 2026–2030. This strategy will address poverty in its various dimensions, focusing on empowering and supporting the poor in areas such as health, housing, education, living standards, and employment."

He noted that "a special fund has been established to support the poorest areas, aligning with the Sustainable Development Goals and reflecting these developments through programs and policies." He explained that "civil society was a partner in the preparation of the 2024–2028 five-year development plan. At all stages of preparation, civil society was represented through the presence of active civil society organizations. They were our partners in the preparation phases, and their continued partnership after preparation and launch involves monitoring and oversight to ensure the plan progresses according to its established paths and objectives."

Al-Hindawi explained that "the private sector is a partner in all stages of preparing and implementing the five-year development plan, and it has been given a significant role in the Iraqi investment landscape as defined by the plan." He added that "the private sector's contribution to the overall investment program is 35 percent, compared to 65 percent for the public sector, representing approximately 84 trillion dinars in investments to be undertaken by the private sector."
Al-Hindawi pointed out that "strengthening the role of the private sector in development, project implementation, and economic policy formulation came about through the establishment of the Permanent Council for Private Sector Development, chaired by the Prime Minister, with representatives from all economic activities and sectors within the private sector as members."

He emphasized that "this represents an important step towards achieving a genuine partnership between the public and private sectors to support the private sector and enable it to play its developmental role effectively and robustly."

China makes a major offer to Iraq

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An economic expert revealedNabil Al-Marsoumi On Friday, regarding the presentationChinaA major investment opportunity for Iraq.

Al-Marsoumi said in a post on his official page, which was followed byAlsumaria NewsHeritage Financial Corporation of China has submitted toIraqA proposal that includes the completion of the following projects:

First: Purchase a stake ranging from 30% to 40% in two ofrefineriesChemicals, with a capacity of 100,000 barrels per day.

Second: Participation in the construction of refineries in Indonesia in exchange forSingaporeWith a capacity of 500,000 barrels per day, payment would be made through a barter system using Iraqi crude oil.

Third, new tankers would be built, with Iraq paying for them with crude oil.

Fourth, oil tankers would be leased for a specific period with the intention of eventual ownership.
He added that "the relevant Iraqi authorities have not responded to the Chinese offer, which was submitted seven months ago and which comes within the context of the Chinese-American competition in Iraq."

Moody’s affirms Iraq’s Caa1 rating with stable outlook

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 Moody’s Ratings has affirmed Iraq’s Caa1 long-term domestic and foreign-currency issuer ratings with a stable outlook, citing persistent challenges from weak institutions and governance.

The rating agency highlighted Iraq’s heavy reliance on the hydrocarbon sector, which accounts for approximately 90% of government revenue, exposing the country to oil price fluctuations and significant carbon transition risks. This dependence makes Iraq particularly vulnerable to projected lower oil prices in 2026-27 compared to 2023-25.

Political fragmentation following the November 2025 elections is expected to delay the formation of a new government and adoption of a timely budget framework, similar to what occurred after the 2021 elections. The current triennial budget expires at the end of 2025.

Moody’s projects Iraq’s fiscal deficit to reach around 7.4% of GDP in 2025, widening to nearly 9% over 2026-27. Government debt is expected to rise above 60% of GDP by 2026. After a GDP contraction in 2024, Moody’s anticipates a modest recovery in 2025, with growth accelerating to approximately 4% in 2026, supported by rebounding oil production.

Despite these challenges, the stable outlook reflects several mitigating factors, including the favorable composition of government debt, robust foreign exchange reserves, and a contained external debt profile. Most of Iraq’s external debt consists of legacy arrears to non-Paris Club members that are currently not being serviced.

The Central Bank of Iraq’s strong foreign exchange reserve position continues to provide resilience against external shocks, reducing near-term liquidity risks despite increasing government financing needs.

Moody’s noted that Iraq’s Environmental, Social, and Governance (ESG) Credit Impact Score is CIS-5, indicating that ESG risk exposures have considerably lowered the country’s rating. This reflects very high exposure to environmental and social risks, combined with very weak institutions and governance.

The rating agency identified factors that could lead to an upgrade, including enhanced resilience of public finances to oil price shocks and improved public finance management resulting in more contained fiscal deficits. Conversely, increased risk of government default, significant erosion of foreign currency reserves, further deterioration in the fiscal deficit, or domestic banking system stress could lead to a downgrade.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Iraq enters the era of "digital maturity"... Huge leaps in the use of the internet and social media

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Iraq is witnessing a significant acceleration in the use of digital technology in its various forms and methods, coinciding with the entry of thousands of international companies into the Iraqi market. This surge in digital consumption is attributed to what could be considered excessive usage. According to official figures released by global digital companies, most notably We Are Social, this trend is occurring amidst warnings about the continued escalation of reliance on rapidly advancing technologies and their increasing dominance over the lives of Iraqi citizens, despite the positive aspects of the current  digital maturity.

The latest digital data released for October 2025 revealed radical shifts in the Iraqi technological landscape, with the country recording record jumps in internet and smartphone usage rates, a clear indication that Iraq is entering a phase of accelerated "digital maturity".

A report issued by We Are Social, which highlights the adoption of connected services, showed that Iraq is witnessing an unprecedented phenomenon in the use of social media, which grew by a tremendous 17% in just one year, with the number of digital identities exceeding 40 million.

In detailing the figures, the report explained that the number of mobile phone subscriptions in Iraq has exceeded the actual population, reaching 50.8 million subscriptions, in a country with a population of 47.3 million people, and with a penetration rate of 108% of the total population, the concept is established that the Iraqi citizen depends entirely on the mobile phone as a main gateway to the world, with the phenomenon of an individual owning more than one SIM card being widespread.

These figures come in conjunction with the rise in the country’s urbanization rate to 72.2%, which has facilitated the deployment of communications infrastructure in cities and densely populated areas.

The internet is no longer a luxury in Iraq, but a necessity for daily life. The report indicated that 39.6 million Iraqis use the internet, which is equivalent to 83.8% of the population. This widespread use, which grew by 4.7% compared to last year, practically means the disappearance of the “digital divide” that the country suffered from in previous decades, paving the way for distance education services and digital work.

The most controversial and interesting figure in the 2025 report is the "rocketing" increase in the number of social media users, with 5.8 million new users joining these platforms in the last 12 months alone.

Ali Nouri, a researcher and specialist in digital media, believes that “the number of social media accounts exceeding (40.1 million) the number of actual internet users reflects a deep division of Iraqi society in the virtual space, and the multiplicity of accounts for one individual across different platforms, which makes these platforms the new ‘public arena’ for Iraqis.”

Nouri affirms: “This new digital landscape opens the door for the business sector; the data clearly indicates that the Iraqi market is fully ready for a revolution in e-commerce and financial technology (FinTech), and with a user base of this size, companies that do not have a clear digital strategy will find themselves out of the competition.”

He continues, "These figures place the Iraqi government before urgent obligations, most notably the need to move from the traditional e-government to a 'smart government' that provides its services through mobile phone applications to suit the behavior of citizens, in addition to the urgent need for strict legislation related to cybersecurity to protect the data of millions of new users."

Sources told Al-Furat News that the granting of advances and loans at Al-Rafidain Bank has been suspended, and the reasons have been revealed.

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Informed sources revealed that the granting of advances, loans and investment projects has stopped at Al-Rafidain Bank.

Sources told Al-Furat News Agency that the reason for the halt was due to a number of factors, most notably the lack of financial allocations and the end of the current fiscal year.

The sources also indicated that "the bank spent large sums on granting loans, advances and investment projects this year, which led to the depletion of the financial allocation."

She noted that the process of granting loans was done manually, not electronically.

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US will not accept 'outside interference' in Iraq's new government, special envoy says

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Washington is 'carefully watching', Mark Savaya says

The US will not tolerate any external actors interfering in the formation of Iraq's new government, Washington's special envoy to the country said on Friday.

Mark Savaya, who President Donald Trump last month named as the special envoy to Iraq, said Baghdad had made “significant progress” over the past three years.

“We hope to see this progress continue in the coming months,” Mr Savaya wrote on X.

He said the US is “carefully watching” the process of Iraq forming its new government following elections this month.

Mark Savaya

@Mark_Savaya

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I look forward to visiting Iraq soon and meeting with the key leaders. Iraq has made significant progress over the past three years, and we hope to see this progress continue in the coming months. At the same time, we are carefully watching the process of forming the new Show more

9:38 AM · Nov 21, 2025

“Let it be clear that the United States will not accept or permit any outside interference in shaping the new Iraqi government,” he said.

The special envoy said he would be heading to Iraq soon to meet key leaders.

Prime Minister Mohammed Shia Al Sudani's political bloc won the most seats but a new government could be a way off due to wrangling to build a majority.

Post-election talks between Shiite, Sunni and Kurdish parties in Iraq usually last for months. By convention in Iraq, a Shiite Muslim holds the post of prime minister, a Sunni is parliament speaker and the largely ceremonial presidency goes to a Kurd.

The main challenge for the next government will be addressing long-standing grievances over poor public services, corruption and unemployment – issues that have fuelled mass protests in recent years. The new administration will also need to maintain the delicate balance in ties between Iran and the US, the country's two main allies.

GuarantCo Extends Portfolio Guarantee to National Bank of Iraq to Boost Climate-Focused Lending and Strengthen Local Financial Sector

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GuarantCo has finalized a portfolio guarantee with the National Bank of Iraq (NBI), marking a milestone entry into Iraq’s banking sector and supporting the country’s efforts to diversify its economy and expand sustainable lending.

NBI is a 62%-owned subsidiary of Capital Bank of Jordan (CBJ), an existing GuarantCo partner. GuarantCo previously provided CBJ with a portfolio guarantee in 2024 and supported the bank in aligning its Health, Safety, Environmental, Social, and Diversity & Inclusion governance with international standards.

Guarantee to Unlock Lending Capacity for Climate-Aligned Sectors

The new transaction—denominated in Iraqi Dinar equivalent—covers an existing loan portfolio, providing immediate capital relief to NBI. This will allow the bank to scale lending to priority sectors with climate and development impact, including green/EDGE-certified housing, manufacturing, and agriculture.

The partnership aims to mobilize private sector capital and reinforce stability within Iraq’s financial system. With oil accounting for more than half of Iraq’s GDP, the deal is positioned to support broader economic diversification and long-term sustainability.

Strengthening Iraq’s Financial System Amid Improving Economic Outlook

Iraq, classified as a Fragile and Conflict-Affected State, is in its most stable political and economic period in decades. Stronger macroeconomic indicators and rising investor confidence led Fitch Ratings to upgrade Iraq’s sovereign credit rating to B- in November 2024.

Large infrastructure gaps and low financial inclusion remain key challenges—areas strongly aligned with PIDG’s Strategy 2030, which prioritizes developing under-served markets across the Middle East, North Africa, and Pakistan.

More than 60% of the guaranteed capital is expected to support projects contributing directly to climate mitigation, advancing SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation and Infrastructure).

Executive Statements

Chinmay Naralkar, Deputy CEO of GuarantCo, said:
“We are pleased to have finalised this deal with NBI and to enter the underserved Iraqi market in a prudent and high-impact way. This transaction reflects our strategy of replicating successful partnerships—such as with Capital Bank of Jordan—to unlock new markets with urgent infrastructure finance needs. It aligns fully with the UN Sustainable Development Goals and PIDG 2030 Strategy.”

Ayman Abu Dhaim, CEO of the National Bank of Iraq, said:
“This partnership marks a significant milestone in strengthening our financing capabilities. The guarantee will allow us to expand lending to productive and sustainable sectors, including green housing, industry, and agriculture—foundations of Iraq’s development agenda. Strong collaboration between local banks and reputable international institutions can drive economic transformation, enhance financial inclusion, and support Iraq’s vision for a more stable and sustainable future.”

Washington announces a quarter-billion-dollar contract with Iraq

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The US Department of Defense announced on Saturday that an American company had been awarded an open-ended contract worth a quarter of a billion dollars to provide support services for the US F-16 aircraft program at Shahid Ali Faleh Air Base.

The ministry said in a statement that “Vectrus Systems, Colorado Springs, Colorado, has been awarded an indefinite contract of $252,050,925, inclusive of cost and fixed fees, to provide airbase support services in support of the Iraqi F-16 program.”

She added that “this contract provides operational support for the base, base life support, and security services, and the work will be carried out at the Martyr Ali Faleh Air Base in Iraq.”

She explained that “the contract is expected to be completed by September 24, 2026, and this contract includes foreign military sales to Iraq,” noting that “this contract was a single-source acquisition.”

She explained that “Foreign Military Sales funds of $123,994,954 were allocated at the time the contract was awarded. This contract is to be executed by the Air Force Lifecycle Management Center, Wright-Patterson Air Force Base, Ohio. (FA8630-25-C-B017 P00004).”