Exchange offices expand in Iraq: Cash economy outpaces banking sector
Exchange and money transfer offices have expanded significantly across Iraq in recent years, reflecting continued reliance by citizens and traders on non-bank financial services despite gradual improvements in financial inclusion.
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According to Prime Minister’s financial adviser Mudher Mohammed Saleh, about 87% of Iraq’s money supply, roughly 95 trillion Iraqi dinars (about $72.5 billion) out of a total 109 trillion dinars (around $83.2 billion), remains outside the banking system. “The trend limits banks’ ability to channel funds into lending and investment and highlights the persistence of cash hoarding and weak integration into the formal financial sector.”
Although financial inclusion indicators have improved, a large segment of Iraq’s population remains outside the banking system or uses it only occasionally. The Central Bank of Iraq said financial inclusion surpassed 40% in 2025, up from around 20% in previous years. The figure includes bank accounts, electronic wallets, and digital payment tools rather than traditional bank accounts alone.
Economic estimates nevertheless suggest that many adults either do not have active bank accounts or rarely use them, underscoring the continued dominance of cash transactions in the local economy.
Iraq’s heavy dependence on imports has also contributed to demand for exchange offices. Traders often turn to these businesses for foreign currency and international transfers because of customs-related complications and difficulties some importers face in accessing US dollars through the Central Bank’s official channels.
This dynamic has increased demand for dollars in the local market, particularly among small and medium-sized traders who struggle to access formal transfer mechanisms. Regulatory estimates indicate that Iraq has thousands of exchange offices and currency companies nationwide, compared with roughly 900 branches operated by public and private banks.
The exchange sector plays an important role in maintaining liquidity flows, but the gap between the official dollar exchange rate and the parallel market rate, ranging from 15% to 20% during periods of market stress, has encouraged transactions outside the banking system and fueled currency speculation. The sector is also estimated to support more than 50,000 direct and indirect jobs in money transfers and liquidity management.
In an interview with Shafaq News, economic expert Dirgham Mohammed Ali said some exchange companies have begun performing functions similar to those of banks by providing loans and salary-backed financing, practices he described as falling outside their legally authorized activities.
Ali noted that the trend reflects the limited role of some banks in extending credit to economic sectors and warned that such lending carries significant risks because of high interest rates and the absence of regulatory oversight governing loan issuance and repayment mechanisms.
“Lending activities are not part of the nature of exchange companies’ work or the licenses granted to them,” he said, adding that their legal role is limited to currency exchange and foreign transfers.
Financial expert Hilal al-Taan told Shafaq News that many Iraqis prefer exchange offices because they offer faster services, simpler procedures, and longer operating hours than government banks.
He added that weak confidence in the banking sector and the economy’s heavy reliance on cash have reinforced this preference. Exchange offices, he argued, facilitate domestic and international transfers and help provide dollars for trade and imports.
On the foreign exchange market, al-Taan stressed that exchange offices influence the dollar rate indirectly through supply and demand dynamics. Increased demand for foreign currency, speculation, and the gap between official and market rates contribute to exchange-rate fluctuations, while expectations of future price increases can also encourage citizens to buy dollars.
IRGC claims responsibility for strike on vessel in Iraqi waters
Iran’s Islamic Revolutionary Guard Corps (IRGC) said it targeted the vessel Sariska in Iraqi territorial waters, Iranian state television reported on Monday.
The IRGC said the attack was carried out in response to “a US attack on an Iranian vessel in the Gulf of Oman, adding that its naval forces would respond decisively to any attack by the US military.
A security source in Basra told Shafaq News that a drone had struck the giant cargo vessel MSC, prompting the evacuation of 20 sailors to the Search and Rescue Center at Al-Faw Port, with no casualties reported.
Earlier in the day, the MSC vessel, which had departed from Dubai, suffered a mechanical malfunction in the Khor Abdullah waterway after leaving North Umm Qasr Port, where it had completed loading 96 export containers.
A giant ship flying the Panamanian flag was targeted by a drone in Iraqi territorial waters.
A security source reported on Monday (June 1, 2026) that the giant ship flying the Panamanian flag was targeted by a drone that crashed inside it while it was in Iraqi territorial waters.
Media reports indicated that the attack "led to a fire on the ship's deck, but there were no casualties."
Earlier today, the Iranian Revolutionary Guard announced that it had targeted the ship (Sariska) belonging to the “Zionist American enemy” with a cruise missile, indicating that “targeting the ship was a response to an American attack on an Iranian ship in the Sea of Oman.”
Coordination Framework authorizes PM on arms issue
Iraq’s Coordination Framework (CF), Iraq’s main Shiite political alliance, expressed support for efforts to place all weapons under state control and to separate the Popular Mobilization Forces (PMF) from political, partisan, and social structures.
In a statement issued after a meeting held at the office of former Prime Minister Haider al-Abadi and attended by Prime Minister Alial-Zaidi, the coalition stressed that decisions on war and peace are a sovereign national matter that belongs exclusively to the Iraqi people through their constitutional institutions, namely parliament and the elected government. “Any action taken outside this framework constitutes a violation of the law and the principles of the constitutional state.”
Regarding the PMF, the coalition affirmed that the force is an official security institution committed to the constitution, applicable laws, and the directives of the commander-in-chief of the armed forces, carrying out its duties within established legal frameworks.
The coalition also emphasized the importance of maintaining cooperation between the Iraqi government and the international community, while continuing the process of ending the mission of the international coalition in Iraq.
Al-Zaydi receives a message from the US: No positions for factions even after disarmament
Al-Zaydi receives a message from the US: No positions for factions even after disarmament
A well-informed political source revealed that Iraqi Prime Minister Ali al-Zaidi received a message from the United States in the past two days, expressing Washington's categorical rejection of the participation of any armed faction in the new Iraqi government, even if those factions were to announce their disarmament or renunciation of military operations.
The source stated that "the American message emphasized that assigning any ministerial portfolio or high-ranking government position to an armed faction or to figures representing such factions would be met with American and Western opposition, and could lead to a political and administrative break with the ministry in question. This would have direct repercussions on the overall Iraqi-American relations, as well as on cooperation with several Western countries."
According to the source, al-Zaidi conveyed the message's contents to the political forces participating in the government formation consultations, particularly those within the coordination framework. Intensive discussions are currently underway regarding this new American veto on the participation of armed factions in the new cabinet.
According to the source, some political forces were leaning towards granting ministerial positions to armed factions after their anticipated announcement of disarming in the coming days. However, the recent US stance has reshuffled the cards and opened a new chapter of debate within political alliances regarding the shape of the next government and the nature of participation in it.
The source concluded that "among the groups whose potential ministerial representation was being discussed after the disarmament announcement was Asa'ib Ahl al-Haq, along with other parties. However, recent developments have prompted political forces to reassess their options in light of international pressure and reservations."
The United States is intensifying its pressure on Baghdad, linking its support for the Iraqi government to the removal of armed factions from state institutions.
Until recently, reports indicated that Washington stipulated that armed factions could not participate in the government unless they disarmed, in addition to halting government funding for some groups.
The Coordination Framework is scheduled to hold a meeting in the coming days to discuss the issues of restricting the weapons of the factions and the decision of the leader of the Shiite National Movement, Muqtada al-Sadr, regarding the "Saraya al-Salam" (Peace Brigades).
Al-Zaydi intends to hold an expanded meeting with security leaders and armed factions that have announced the handover of their weapons to the state, in order to establish mechanisms and a timeframe for integrating their members and dismantling their positions, in addition to discussing the "guarantees" that will be given to the factions.
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A huge financial surplus... and a service reality that has not changed: What happened?
The era of Mustafa Al-Kadhimi has sparked widespread controversy that continues to resurface whenever the issue of managing public funds and oil surpluses is raised, especially in light of talk about huge sums that entered the state treasury during the period of high oil prices, compared to a clear limitation in the size of service and development projects completed on the ground.
While supporters of that phase promote the idea of “financial stability” and crisis management in a difficult economic situation, critics argue that the surpluses that were subsequently achieved did not translate into a real reconstruction boom, and their effects remained limited to covering operational expenses and salaries, without a tangible impact on infrastructure or basic services.
At the heart of this debate stands the most prominent economic decision at the end of 2020, when the exchange rate of the dinar against the dollar was adjusted. The government at the time considered this decision a necessary step to address the financial deficit, while opponents saw it as an influential shift that directly affected the prices of basic commodities and the standard of living, and left a long-term impact on the purchasing power of citizens.
As oil revenues increased in subsequent years, questions grew about the absence of strategic projects commensurate with those revenues, as observers believe that the period did not witness a construction momentum that matched the size of the available resources, with the exception of continued operational spending and covering the state’s financial obligations.
The issue of investment projects also remained controversial, given the failure or absence of a number of announced initiatives, and the increasing voices that spoke of a gap between the amount of money flowing into the country and what was actually achieved in terms of development and services.
On the other hand, supporters of that era still maintain that the government faced complex political, economic and security challenges, and that performance evaluation should take into account the nature of the circumstances in which the country was run.
Between these two narratives, the Al-Kadhimi era remains one of the most controversial economic periods in Iraq, between those who describe it as managing a difficult crisis, and those who consider it a huge financial opportunity that was not invested in the way that could have changed the reality of services and reconstruction.
"It's no longer a separate issue": Washington is reshaping its priorities in Iraq.
"It's no longer a separate issue": Washington is reshaping its priorities in Iraq.
Diler Khalaf Osman, a researcher in international relations and Middle Eastern affairs at the University of Tennessee, affirmed that Washington's decision to merge the Iraq and Syria files under a single envoy reflects a fundamental shift in US strategy toward the region.
Osman stated that this move confirms the United States no longer treats Iraq as a separate or isolated issue with its own internal particularities, but rather as part of a broader regional security and geopolitical framework.
He added that this approach represents a shift from the US approach that has prevailed since 2003, which focused on democracy and development, to a regional approach that views Iraq through the lens of regional power balances, aiming to reduce Iranian influence and redirect the geopolitical trajectory of both countries in a way that serves US interests.
The researcher pointed out that the background of the new envoy, Tom Barrack, and his ideology related to the idea of “America First” reveal the features of his mission, as he does not seem concerned with the files of democracy, federalism and political pluralism as much as he is concerned with strengthening the central state and its security capabilities, to ensure that it does not pose any threat to American interests, and to enable it to manage its security itself in the long term, which reduces the need for a direct American military presence.
The President of the Republic affirms to Harris Iraq's keenness to develop its relations with the United States and strengthen the strategic partnership.
Amidi received the Chargé d'Affaires of the US Embassy in Iraq, Joshua Harris, on Monday evening to discuss bilateral relations and security and political issues of mutual concern.
They also discussed ways to enhance cooperation between Iraq and the United States in various fields, in addition to emphasizing the importance of the state's monopoly on the use of force and supporting efforts aimed at consolidating security and stability.
Amidi noted Iraq's continued efforts to strengthen its capabilities in managing security matters and its adoption of a policy of openness and cooperation with various countries around the world based on respect for sovereignty and non-interference in internal affairs. He stressed the importance of intensifying joint efforts to reduce tensions in the region and adopting dialogue and diplomatic means to address disputes and outstanding issues in a way that strengthens regional security and peace.
For his part, the US Chargé d'Affaires reiterated his country's support for Iraq's security, stability, and sovereignty, emphasizing the United States' desire to continue joint cooperation with Baghdad in various fields.
Harris also praised Iraq's role in supporting regional stability and its efforts to bridge differences among countries in the region and strengthen dialogue and understanding, which contributes to addressing common challenges and consolidating regional security.
Minister of Electricity Discusses Enhanced Cooperation in Energy Sector with U.S. Chargé d'Affaires
Minister of Electricity Ali Saadi Waheeb met today, Monday, with Joshua Harris, the Chargé d'Affaires at the U.S. Embassy in Iraq, to discuss prospects for joint cooperation within the electric power sector.
The Media Office of the Ministry of Electricity stated in a press release—received by the "Al-Sa'a" network—that "the meeting addressed mechanisms for enhancing collaboration between the Ministry and the U.S. side, particularly through American companies operating in the energy field. This collaboration aims to support the Ministry's projects and bolster the capabilities of the national electrical grid."
The statement added that "both sides explored avenues for expanding technical and investment cooperation, as well as following up on projects of mutual interest, with the ultimate goal of achieving the objectives of energy sector development and improving the quality of services provided to citizens."
Trump on Iran's suspension of talks: I was not informed of this decision in advance.
Trump told NBC: "I was not informed in advance of this decision."
He added, "It is appropriate for Iran to say that it has suspended the exchange of messages because it prefers negotiation to fighting, but it has not informed us of this."
He continued, "This does not mean that we will start dropping bombs everywhere inside Iran, but we will keep the embargo in place."
Trump expects to reach an agreement with Iran within the next week.
US President Donald Trump said he believes the United States and Iran could reach an agreement within the next week aimed at extending the ceasefire and reopening the Strait of Hormuz to shipping.
In his remarks to ABC News, Trump indicated that he expected this agreement to be reached within the framework of the ongoing talks between Washington and Tehran, which aim to solidify the current truce and address outstanding issues between the two sides.
Trump’s remarks come at a time when diplomatic efforts are continuing to extend the ceasefire and contain the tensions that the region has witnessed in recent months, in addition to the importance of reopening the Strait of Hormuz, which is considered one of the most important maritime routes for transporting oil and gas globally, according to Sky News.
Mohsen Al-Humaid: ICC continues its efforts to open channels of cooperation and investment with international institutions and companies.
The President of the International Chamber of Commerce - Iraq (ICC), Engineer Mohsen Al-Humaid, affirmed that investment represents the true gateway to achieving sustainable economic development, pointing to the importance of working to attract the largest global investments to the Iraqi market in a way that contributes to supporting the reconstruction movement and revitalizing various productive and service sectors.
Al-Humaid said that Iraq has promising investment opportunities and an economic environment capable of attracting global companies, indicating that the current stage requires strengthening the partnership between the public and private sectors and providing the necessary facilities for investors in a way that will positively affect the national economy and provide new job opportunities for young people.
He added that the International Chamber of Commerce – Iraq (ICC) continues its efforts to open channels of cooperation with international institutions and companies, and to work on presenting a positive image of the economic reality in Iraq.
He stated that attracting foreign investments contributes to the transfer of expertise and modern technology and supports the comprehensive development process in the country.
A historic event in Iraqi ports... the first Chinese ship arrives directly! 
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