The ongoing concerns regarding the scarcity of financial liquidity in Iraq have intensified following recent comments from Minister of Finance Taif Sami, which were unable to quell apprehensions. Central Bank Governor Ali Al-Alaq has faced criticism for suggesting the closure of exchange outlets, raising alarm about a potential deepening of the country’s financial crisis.
In response to Al-Alaq’s statements, which labeled salary payment outlets as unofficial and hinted at their closure, these outlets across Iraq announced a strike beginning January 20 of this year. This collective action reflects the mounting frustration within the financial sector.
This Saturday, the Central Bank issued a forceful rebuttal, asserting that no decision has been made to close exchange outlets or to transfer their operations to official exchange companies. The Central Bank emphasized its commitment to expanding monetary delivery channels, which include ATMs and electronic payment systems, as part of a broader strategy to enhance financial services across the country.
The statement reiterated the importance of sourcing news from official channels and maintaining transparency in communication via its official website and verified social media pages.
In communications directed at all stakeholders within the financial and banking sectors, the Central Bank urged banks and non-banking financial institutions to broaden their financial services, especially in underserved regions lacking existing infrastructure.
Activists on social media have since criticized government measures related to salary disbursements, noting that the timing of the strike coincides with the critical period for processing employee and retiree salaries. This situation threatens to create significant congestion at bank branches, exacerbating an already pressing liquidity crisis.
It is projected that up to 10 million individuals—including social welfare beneficiaries, retirees, and employees—will seek payroll withdrawals from banks within a span of ten days if the closure of the payment outlets proceeds as threatened.
Employees and retirees have reported delays in receiving their December salaries, attributing these issues to cash liquidity shortages within the banking sector. The government has countered these claims, insisting that there is no cash crunch impacting salary disbursements.
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The Ministry of Finance has reiterated its position, stating that pension and social welfare payments are secure, dismissing concerns about liquidity shortages as unfounded speculation. In a recent address, Finance Committee member Mustafa al-Karawi acknowledged the existence of a genuine financial crisis, albeit one that may delay, rather than disrupt, salary payments.
Despite a budget increase for 2024, driven by unprecedented spending in 2023, which included the hiring of over half a million new public sector employees and major infrastructure investments, challenges persist. The government’s financial advisor, Mazhar Muhammad Saleh, highlighted a looming budget crisis in 2025, largely stemming from declining oil prices, which remain the backbone of Iraq’s revenue system. He stated, “We do not anticipate major problems in 2024, but we require stricter fiscal discipline moving into 2025.”
Iraq, as the second-largest oil producer within OPEC, remains highly dependent on oil revenues, which account for a significant portion of its export revenues and approximately 90% of government income, rendering the nation particularly vulnerable to fluctuations in global crude markets.