Iraq, which leads the world in the number of banks, is the weakest in terms of economic influence.
Despite having more than 70 banks, Iraq's banking sector remains among the weakest in the region in terms of economic impact, financing capacity, and level of trust, while countries like the UAE and Saudi Arabia have successfully transformed their banks into key drivers of growth and investment. The paradox here lies not in the number of banks, but in the nature of the role they play within the economy.
Reading the banking reality in Iraq reveals that the main problem does not lie in the lack of financial institutions, but rather in the absence of the actual economic function of the bank, as a large part of these banks does not work as a financier of projects or a supporter of productive activity, as much as they are linked to limited activities that revolve around the state, liquidity and foreign currency.
In Iraq, oil revenues constitute approximately 90 percent of the state's resources, making the economy fundamentally rentier rather than production-based. Within this model, the central bank became the primary source of dollars, while private banks, to a large extent, remained more like financial intermediaries profiting from the money and currency cycle than institutions that channeled financing into industry, agriculture, and productive services.
According to this equation, Iraqi banks have, in many cases, become institutions that depend more on the state than they contribute to the economy, which explains their weak role in stimulating investment or expanding the private sector. In healthy economies, banks have a clear function: mobilizing savings and converting them into loans, investments, and projects. In Iraq, however, this process remains weak and fragmented.
In contrast, the experience in the UAE and Saudi Arabia presents a completely different picture. While fewer banks operate within a more diversified and dynamic economic environment encompassing energy, real estate, tourism, aviation, technology, and sovereign wealth funds, the bank's role extends beyond mere financial intermediary to include direct participation in growth. This is achieved through financing major projects, supporting the private sector, and integrating with both domestic and international investment flows.
The difference isn't limited to the nature of the economy; it extends to the level of trust between citizens and the banking system. In Iraq, the cash economy remains dominant, and a large number of citizens still prefer to keep their money outside of banks. This is a result of accumulated factors related to weak legal protections, a lack of transparency, and declining confidence in the banking system's ability to protect savings and provide stable and secure services.
In the UAE and Saudi Arabia, increased financial inclusion, the expansion of bank card use, and widespread reliance on electronic payments have helped to boost confidence in banking institutions and connect individuals and businesses on a daily basis to the formal financial system, giving banks greater social and economic depth.
Governance and oversight stand out as another crucial factor in explaining this disparity. The Iraqi banking sector suffers from a relative weakness in internal audit systems, inconsistencies in compliance, and political and economic interferences that have affected the efficiency of some institutions. In the view of many observers, some banks appear to be more like limited-functional financial fronts than integrated banking institutions capable of managing credit and risk according to modern standards.
In contrast, the banking systems in the UAE and Saudi Arabia are based on stricter oversight and higher levels of compliance with international standards, including capital adequacy requirements, risk management, anti-money laundering, and corporate transparency, which has given those markets a greater ability to attract investment and enhance financial stability.
Digital transformation is also one of the most important differences between the two models. While banking services in Iraq still suffer from a clear slowness in development, a relative weakness in technological infrastructure, and the instability of some payment systems, banks in the Gulf have been able to move to advanced levels of digitalization, through smart applications, instant transfers, and electronic services that have become part of the daily lives of individuals and companies.
From a risk and liquidity perspective, Iraq faces additional challenges related to high levels of non-performing loans, weak risk management in some institutions, and a heavy reliance on government or non-productive liquidity, while Gulf banks typically enjoy higher levels of capitalization, reserves, and liquidity, giving them a greater ability to absorb shocks and deal with economic fluctuations.
In conclusion, the crisis in Iraq's banking sector is not one of quantity, but rather one of function, structure, and trust. Iraq does not suffer from a shortage of banks, but from the absence of a genuine developmental role for them, and from the fact that a large portion of them are linked to a rentier economy and the dollar, instead of being directly linked to a productive economy and long-term investment.
In this sense, banks in the UAE and Saudi Arabia act as an engine for economic growth, while a large part of the Iraqi banking sector is still far from this role, which makes its impact limited despite its large size.
If the current model persists in Iraq, the banking sector will remain large in number but weak in impact. However, if the country embarks on genuine reform encompassing governance, oversight, digital transformation, building trust, and linking banks to the productive economy, Iraq possesses the market size and domestic demand to build one of the strongest financial sectors in the region.
Dinar reserves in the red zone: A look at the compass of financial collapse in Iraq
While the world watches the fluctuations of Bitcoin, which has surpassed $75,000, and the volatility of oil prices around $74, Baghdad's financial apparatus faces a different kind of challenge: the challenge of "sovereign liquidity." Figures compiled by Kurdistan24's economic desk indicate a dramatic shift in the Iraqi Central Bank's ability to manipulate the local currency (the dinar), amid alarming indicators .
From Peak to Below Trillion: The Journey of Freefall
Returning to the official financial data we analyzed, we find that the Central Bank of Iraq's reserves of local currency (the dinar) were at their peak in February of last year, stabilizing at 2.278 trillion dinars. However, since then, the trend has been downward, only stopping at the "red zone."
In March of this year, reserves recorded a historic decline, reaching only 0.916 trillion dinars. This figure is not merely a statistic; it is a clear indication of a decrease in reserves exceeding 50% within a single year, which casts serious doubt on the "fiscal sustainability strategy."
Why is Baghdad depleting its reserves?
The problem lies in a simple but terrifying equation: Iraq spends twice as much as it earns.
On-the-ground observations reveal that the gap between government revenues and expenditures has widened to an unprecedented degree. While the oil export artery via the Turkish Ceyhan pipeline has been disrupted due to political and legal complexities, operating expenses and salaries have continued to inflate, forcing the central bank to draw on its reserves to cover the resulting deficit.
Lack of alternatives and entering the tunnel of borrowing
The Iraqi economy remaining hostage to a single barrel of oil is "slow suicide". In the absence of any other real sources of income, and with the cessation of northern exports, the Iraqi state is left with two bitter choices:
depleting what remains of the reserves, which threatens the purchasing power of the dinar (which is currently trading in the markets at levels of 153,000 to 100 dollars).
Throwing ourselves into the arms of domestic loans, which means mortgaging the future of upcoming budgets to burdensome domestic bank debts.
What we are witnessing today is a final "wake-up call" for decision-makers in Baghdad. The economy doesn't lie, and the numbers don't lie; the dinar's reserves falling below one trillion represents a direct threat to the state's ability to fulfill its basic obligations to its citizens.
The solution does not lie in withdrawing more money, but in reforming the financial structure and immediately opening the disrupted export channels, before we find ourselves facing a deficit that even borrowing cannot solve.
Parliament preempts the decision on the prime ministerial candidate... Rashid: There will be no budget for the current year, 2026.
The Iraqi Parliament has settled the debate regarding the fate of the draft federal budget law for the current year, 2026, amidst the ongoing crisis surrounding the nomination of a candidate for the position of Prime Minister, a matter on which political and parliamentary circles are still awaiting a resolution.
MP Ahmed Hama Rashid stated to the Iraqi National News Agency ( NINA ), "There is no budget for the current year, 2026, because the draft budget law must be prepared by mid-May 2025. Therefore, there will be no budget law for the current year."
He explained, "Financial statements will be issued by the Ministry of Finance and sent to the Federal Board of Supreme Audit, and then approved by Parliament later."
He added, "The amended Federal Financial Management Law No. 6 of 2019 addresses this situation to facilitate the annual budget by disbursing expenditures at a rate of 1/12 of all expenditures included in the previous budget. This is a legal procedure that is in practice and adopted by Iraqi state institutions."
Regarding the approval of the final accounts, Rashid explained that "these accounts will be based on official financial statements sent to the Federal Board of Supreme Audit, for preparation, auditing, and reconciliation."
Trump decides to extend the truce with Iran
US President Donald Trump announced on Tuesday, April 21, 2026, his decision to extend the ceasefire with the Islamic Republic of Iran and suspend imminent military attacks on Tehran, in a message he published via his social media platform (Truth Social).
Trump revealed that this decision came in response to a formal request made by senior Pakistani officials, saying: "At the request of General Asim Munir and Pakistani Prime Minister Shahbaz Sharif, we decided to suspend our attacks on Iran to give Iranian leaders and representatives the opportunity to come up with a unified proposal for negotiation."
In his message, the US president sharply criticized the power structure in Tehran, noting that "the Iranian government is in a state of extreme disarray and division, which was not surprising to us."
Trump stressed that extending the truce does not in any way mean easing military or economic pressure.
He emphasized: "I have given orders to our army to continue the naval blockade and to remain at the highest levels of readiness and combat capability in all aspects."
The US president concluded his statement by noting that this extension is temporary and will only remain in effect until Iran submits its final proposal, at which point the talks will end "one way or another," in a clear reference to the two options (agreement or war).
Oil jumps more than 5% as Trump rejects ceasefire extension
Oil prices rose by more than 5% on Tuesday evening after US President Donald Trump refused to extend the ceasefire with Iran.
Brent crude futures rose $4.30, or 4.5%, to $99.78 a barrel by 5:13 PM GMT, while US West Texas Intermediate crude rose $4.75, or 5.3%, to $94.36.
The Iranian parliament dismisses the ceasefire extension as "meaningless."
The Iranian parliament dismissed US President Donald Trump's announcement of a ceasefire extension.
An advisor to the Iranian parliament speaker stated, "President Trump's announcement of a ceasefire extension is meaningless," adding, "The losing side cannot dictate terms."
He further stated, "The continuation of the blockade is equivalent to bombing in terms of impact, and it must be met with a military response." He
also described the ceasefire extension as an attempt to buy time in preparation for a "surprise strike."
The advisor indicated that the current situation requires Iran to "take the initiative" in dealing with developments.
Trump agrees to extend the ceasefire... without setting a new deadline
US President Donald Trump announced that he has agreed to Pakistan's request for a ceasefire with Iran.
In a post on the Truth Social platform, Trump said he agreed to extend the ceasefire to give Iranian leaders a chance to "reach an agreement."
The US president added that he has ordered the continuation of the blockade on Iranian ports.
He continued, saying that the Iranian government is now "divided," and that the ceasefire will be extended to conclude talks with Iran "one way or another."
Trump did not specify a new deadline.
Representative of the Iranian Supreme Leader: There are currently no negotiations, and we will negotiate on our terms.
In press statements, the representative of the Iranian Supreme Leader in the Revolutionary Guard said: "The enemy must accept that we are in the position of the victor and he is in the position of the loser."
The representative of the Iranian Supreme Leader in the Revolutionary Guard added, "When the Supreme Leader decides to change our battle from missiles to negotiations, our people will support him."
Wednesday night is decisive... Baghdad is on edge and the region holds its breath.
Iraq and the region are heading into a highly sensitive night, where internal calculations intersect with external pressures, and Baghdad appears to be holding its breath, awaiting the outcome of meetings that are expected to have significant repercussions. Domestically, the coordination framework continues its faltering efforts to finalize a candidate for the next prime minister, while external attention is focused on a new round of US-Iranian talks in "Islamabad 2," amidst an escalation that has yet to lose momentum.
It is difficult to view these two paths as separate. Iraq, by virtue of its location and the complex balance of power within it, not only observes what is happening around it but also finds itself once again directly affected by it. The higher the tension between Washington and Tehran, the greater the cost of division within Baghdad, and the more complicated the task of forging a domestic settlement becomes.
Over the past few weeks, the regional crisis has transcended the confines of the political and military confrontation between the United States and Iran, extending into energy markets, shipping, and the global economy. With growing concerns about oil flows in the region, any escalation in this open conflict could quickly impact the political climate within Iraq, particularly at this highly sensitive juncture regarding the formation of the next government.
At the heart of this tense situation, the media found itself facing a familiar dilemma that recurs with every major crisis. The allure of a scoop is strong, leaks proliferate, and the political vacuum fuels speculation, but the result is often a rush to conclusions before the facts are established. This was evident in the hours leading up to the framework meeting, when some platforms acted as if a decision had already been reached, a mistake even some globally influential institutions made.
On Monday night, the political and media landscape was rife with conflicting assessments regarding whether the coordinating framework would finally reach an agreement to end the debate over the name of the next prime minister. However, the meeting concluded without a resolution, and the decision was postponed until Wednesday. This postponement itself became a significant political signal. The problem is no longer merely a disagreement over a name; it has become an expression of a deeper division concerning the balance of power within the framework and the ability to produce a unified decision at a time when local considerations are intertwined with regional concerns and international pressures.
Coordination Framework Crisis
Since its formation in 2022, the Coordination Framework has never faced such a delicate internal test. The competition, which had gone through multiple phases and involved the circulation of several names, essentially boiled down to a political confrontation between Nouri al-Maliki and Mohammed Shia al-Sudani, before more complex elements entered the fray, including the American threat of sanctions should Maliki assume the premiership. This threat did not remain confined to external messages but quickly transformed into a source of pressure within the Framework itself, prompting some factions to reconsider their positions.
In this context, many interpreted al-Sudani's announcement at the time that he was withdrawing his candidacy in favor of al-Maliki as a calculated move, not because it closed the door to competition, but because it shifted the burden onto his opponent and pushed him into a more difficult political confrontation. This confrontation would not only require him to secure domestic consensus, but also risk encountering American opposition with direct repercussions for Iraq. However, instead of opening a path to compromise, this move further complicated the situation, raising concerns within the political establishment about the cost of pursuing a course of action that could plunge Baghdad into a new crisis with Washington.
When a resolution proved impossible, the search for compromises began. According to several sources who spoke to Shafaq News Agency, Maliki proposed Basim al-Badri, head of the Accountability and Justice Commission, as his replacement, while Sudani put forward Ihsan al-Awadi, spokesman for the caretaker government, as his own alternative candidate. This attempt not only reflects a desire to avoid a collapse within the coalition, but also reveals that the crisis has transcended the individual candidate to encompass a broader question: who is capable of setting the terms within the coalition itself?
Meanwhile, Tuesday brought further indications that Wednesday's meeting would be anything but ordinary. Informed sources revealed that caretaker Prime Minister Mohammed Shia al-Sudani visited Nouri al-Maliki, leader of the State of Law Coalition, during which they discussed several proposals to break the political deadlock. Among these proposals were adopting an absolute majority within the coalition to decide on the candidate's name, or resorting to the parliamentary weight of the blocs supporting him. Regardless of the formula the attendees ultimately adopt, the mere fact that these mechanisms are being put forward reveals that consensus is no longer easily attainable, and that the coalition is approaching a true test of its ability to manage its differences without allowing the division to escalate into a permanent political rupture.
Iranian-American escalation
This internal complexity is, in the view of many politicians and observers, inextricably linked to developments in the US-Iranian relationship. Iraq will not choose its next prime minister in a vacuum. Any understanding or escalation between Washington and Tehran will have direct repercussions on the future power dynamics in Baghdad, and on the limits of maneuver available to the prime minister who emerges from this settlement, should one materialize.
In contrast, the Islamabad talks themselves appear to be taking place amidst an equally tense atmosphere. The anticipated negotiations are occurring as the rhetoric of escalation continues to outweigh that of de-escalation, and as recent developments weigh heavily on the region and the world, particularly after the crisis reached a level that threatens energy security and vital shipping lanes. With Tehran's decision to close the Strait of Hormuz, fears have grown that the confrontation could extend beyond its political and military boundaries, and global markets are now watching to see if the door to a settlement remains open, or if the region is heading toward an even more turbulent phase.
As in Baghdad, the media war also preceded the negotiations in Islamabad. Washington escalated its rhetoric, and Tehran responded in kind, narrowing the gap between statements and actual pressure. Political discourse became as much a part of the battle as it was a reflection of it. In such an atmosphere, the negotiations appear not merely as another diplomatic encounter, but as a test of both sides' ability to keep the conflict under control and prevent it from spiraling further.
Between Baghdad and Islamabad, the world is not witnessing two separate meetings, but rather a single, multifaceted scene. At one end, there is an Iraqi governance crisis, floundering amidst competing names, objections, and power balances. At the other end, there is a regional confrontation open to various possibilities. And in the middle, Iraq once again stands in a precarious position, observing, being affected, and trying to prevent itself from being the first to suffer.
The New York Times: The Trump administration is demanding the nomination of a new prime minister for Iraq.
The newspaper revealedNew YorkTimes, thatThe administration of US President Donald TrumpShe called for the nomination of a new prime minister inIraq.
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Al-Maliki and Al-Sudani stress the importance of expediting the completion of the requirements for forming the next government.
Nouri al-Maliki, head of the State of Law Coalition, stressed on Tuesday the importance of expediting the completion of the requirements for forming the next government.
A statement from al-Maliki's office indicated that "al-Maliki received Prime Minister Mohammed Shia al-Sudani at his office today," adding that "during the meeting, the importance of expediting the completion of the requirements for forming the next government was emphasized."
Al-Sudani meets with Al-Maliki and they discuss the importance of expediting the formation of the government and continuing deliberations.
For its part, the Reconstruction and Development Coalition issued a press statement, which was received by (Iraq Today), confirming the meeting, noting that the meeting between Al-Sudani and Al-Maliki reviewed the latest developments on the national and regional scenes, where the importance of the talks was emphasized within the understandings agreed upon by the leaders of the coordination framework to proceed with completing the constitutional requirements and forming a government that meets the will and aspirations of the Iraqi people.
In this context, the State of Law Coalition confirmed that this meeting took place, noting that it was held to discuss political developments in the country, particularly the issue of forming the next government.
The media office of the head of the State of Law Coalition stated in a post on the (X) platform that "the head of th State of Law Coalition, Nouri al-Maliki, received the Prime Minister, Mohammed Shia al-Sudani, in his office today."
He added that "the meeting emphasized the importance of expediting the completion of the requirements for forming the next government," in light of the ongoing dialogues between the political forces.
Commenting on this meeting, Mashreq Al-Fariji, a leader in the Reconstruction and Development Coalition, revealed that the meeting between the two leaders was intended to push forward the formation of the government and expedite the resolution.
He added, in a post on the (X) platform, that “the State of Law proposal (8/12) is still in place, which is difficult to pass under the (6/6) equation, in reference to the division of the leaders of the coordination framework into two equal fronts.”
He pointed out that "the Reconstruction and Development Coalition adheres to the optimal solution, which is to go to the option of a two-thirds vote of the largest bloc's representatives as a clear way to end the political deadlock."
The Sudanese coalition proposes a "secret" vote for the next Iraqi prime minister.
Qusay Mahbouba, a leader in the “Reconstruction and Development” coalition (led by current Prime Minister Mohammed Shia al-Sudani), proposed on Tuesday to the Coordination Framework a new mechanism for selecting the next Prime Minister, which is to adopt a “secret vote” for the 186 members of the House of Representatives who are part of the Framework, in order to get out of the political deadlock.
Mahbouba said in a post that the coordination framework had reached a "dead end; there is no clear mechanism for resolution and no unified vision for the next stage," considering that the solution lies in "inviting the representatives of the framework to a secret vote, as the general body, to choose the candidate for prime minister."
He pointed out that implementing this proposal "will get the framework out of its crisis, and restore the representatives to their true role, so that the decision becomes binding and respected by all," describing this mechanism as "a clear message confirming that democracy begins with the will of the representatives, not with the understandings of the leaders."
Two mechanisms for selecting a prime ministerial candidate have been revealed; the final decision will be made at tomorrow's framework meeting.
The spokesperson for the Reconstruction and Development Bloc, Firas al-Muslawi, revealed on Tuesday that two specific mechanisms have been proposed to resolve the issue of selecting the largest bloc's candidate for the position of Prime Minister. He indicated that the leaders of the Coordination Framework will choose one of them in a meeting on Wednesday.
Al-Muslawi stated, "The leaders of the Coordination Framework agreed in a meeting on Monday evening that the nomination of the next candidate should be based on a two-thirds majority system to ensure acceptance and proceed with the formation of the government."
He added, "The current discussions are focused on finalizing the two-thirds mechanism, with two options being presented: the first relies on a two-thirds vote from the leaders of the Framework's constituent forces, and the second relies on a two-thirds majority of the members of Parliament belonging exclusively to the Coordination Framework's constituent forces."
Al-Muslawi pointed out that "Wednesday's meeting will be decisive in choosing one of these two mechanisms to immediately begin the procedures for nominating the next Prime Minister."
It is worth noting that the leaders of the Coordination Framework held a meeting on Monday evening without reaching an agreement on the largest bloc's candidate for the next Prime Minister position, and the meeting was postponed until Wednesday.
Three thorny issues stand in the way of an agreement between Washington and Tehran.
US Vice President J.D. Vance is scheduled to leave Washington on Tuesday, April 21, 2026, accompanied by senior US officials, heading to Pakistan ahead of the latest round of talks regarding the conflict with Iran.
Informed sources reported that a second round of negotiations between the American and Iranian delegations is scheduled for Wednesday in Islamabad, noting that the situation remains cautious and volatile, given the continued exchange of sharp statements between the two sides. Current indications suggest that a number of fundamental obstacles remain unresolved, with the most prominent points of contention being:
1. The fate of Iran's uranium stockpiles:
Trump suggested last week that Iran had agreed to ship its stockpile of highly enriched uranium to the United States, a claim a senior Iranian official quickly denied, calling the request "unrealistic".
Iran possesses approximately 400 kilograms of uranium enriched to 60%, a critical quantity. One of the proposals under consideration involves unfreezing Iranian assets in exchange for Tehran surrendering this stockpile. A source familiar with the negotiations stated that Iran is demanding a significant easing of sanctions and the release of assets exceeding $20 billion.
2. Uranium Enrichment Restrictions:
The duration of the enrichment program suspension is a major point of contention. An Iranian official rejected Trump's assertions that Tehran had agreed to halt the program indefinitely, emphasizing that Iran "will never accept" being "an exception to international law." During talks held the weekend before last, US negotiators proposed a 20-year suspension of enrichment, while Iran countered with a five-year proposal, which Washington rejected, according to a US official.
3. Navigation Security in the Strait of Hormuz:
Global markets breathed a sigh of relief last Friday after Iran announced the reopening of this vital waterway, which had been effectively closed for nearly two months. But this calm proved fragile, as Tehran reimposed strict restrictions on navigation in response to Trump's statements that the US embargo on Iranian ports would continue until a final agreement is reached. In a worrying development, two ships reported being attacked last Saturday while attempting to transit the strait.
Why Do Banks Fail in Iraq While the UAE & Saudi Arabia Advance?
Deep analysis of weaknesses in Iraq’s banking sector compared to the UAE & Saudi Arabia
IRAQ
Weak / Ineffective Banking Structure
- More than 70 banks, but most are small and undercapitalized
- Depend heavily on currency auctions and government transfers
Oil-Dependent Economy
- Over 90% of revenue comes from oil
- Weak economic diversification
- Banks do not effectively finance productive sectors
Low Trust & Financial Inclusion
- Citizens prefer cash over banks
- Low use of banking services
- Weak trust due to past experiences and lack of transparency
Weak Governance & Oversight
- Political and economic interference
- Weak compliance and anti-money laundering measures
- Some banks act as financial fronts
Outdated Technology
- Slow digital transformation
- Unstable payment systems
- Limited electronic services
High Risk & Liquidity Issues
- Rising non-performing loans
- Poor risk management
- Heavy reliance on government liquidity
Result in Iraq
A large banking sector in numbers, but weak in impact
It does not drive the economy — it depends on oil instead
UAE & SAUDI ARABIA
Strong, Efficient Banks
- Fewer banks but stronger and more efficient
- Finance large projects across multiple sectors (energy, real estate, tourism, tech)
- Key driver of economic growth
Diversified & Productive Economy
- Clear economic diversification
- Banks finance real productive sectors
- Strong link to domestic and global investment
High Trust & Financial Inclusion
- Widespread use of banking services
- Instant payments and transfers
- Strong consumer protection
Strong Governance & Regulation
- Global standards (Basel III)
- Transparent and strict banking oversight
- Strong anti-money laundering enforcement
Advanced Digital Transformation
- Modern digital banking and apps
- Fast, secure transfers
- Heavy investment in financial technology
Strong Liquidity & Low Risk
- High solvency ratios
- Advanced risk management
- Strong reserves to absorb shocks
Result in UAE & Saudi Arabia
Strong banks that drive the economy and support development Engines of growth, investment, and global confidence
What Does Iraq’s Banking Sector Need?
- Structural reform & independence
- Transparency, compliance, and anti-corruption
- Investment in digital transformation
- Financing real productive sectors
- Building trust and protecting depositors
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