Financial Crime World

Iraq’s Banking Sector Under Scrutiny as PM Orders Foreign Capital Assessment

Revitalizing the Private Banking Sector

In a move aimed at revitalizing Iraq’s private banking sector, Prime Minister Mohammed Shia al-Sudani has ordered the Central Bank of Iraq to assess the contribution of foreign capital to national banks and evaluate the current situation. This directive comes amid concerns about the dominance of foreign entities in Iraqi banks.

Concerns Over Foreign Influence

Lawmakers have been urging an amendment to the Banking Law No. 94 of 2004, which allows foreign entities to possess a stake greater than that of Iraqi entities in certain banks. According to Alia Nassif Jassim, a member of parliament’s integrity commission, foreign entities can influence financial decision-making in Iraq if they have shares exceeding 49 per cent.

Key Concerns

  • Foreign entities control up to 75% of daily dollar auctions
  • Local banks receive less than 20%
  • Jordanian banks receive billions of dollars monthly from Iraq

Parliament’s Finance Committee Meets with Iraqi Private Banks Association

The Iraqi Private Banks Association met with parliament’s finance committee on April 28 to discuss enhancing the banking sector and amending banking laws. The focus was on:

  • Backing sustainable development and digital transformation in Iraq
  • Optimizing financial resources
  • Tackling liquidity concerns

Economic Outlook for 2024

The International Monetary Fund (IMF) predicts that Iraq will witness overall growth in 2024, with risks decreasing despite heightened uncertainty. However, the significant increase in internal debt flux counters the decline in external debts.

Key Statistics

  • External debt decreased from US$19.729 billion in 2022 to US$15.976 billion in 2023 and is projected to reach approximately US$8.9 billion by the end of 2024
  • Internal debt surged from 38.3 trillion dinars (US$29.4 billion) in 2019 to 73.2 trillion dinars (US$56.3 billion)

Conclusion

The government is trying to create a supportive internal environment for private banks, but they face a dilemma after being deprived of trading in foreign currencies. The Central Bank of Iraq will assess the contribution of foreign capital and evaluate the current situation to address concerns about foreign influence and optimize financial resources.