Banking Reforms in Iraq: A Strategic Move Towards Economic Stability
In response to the ongoing financial and banking challenges in Iraq, Dr. Saleh Ma’oud, the Prime Minister’s advisor for banking affairs, has outlined significant reforms initiated by the Sudanese government in the banking and financial sectors. He emphasized the near completion of a plan to restructure Al-Rafidain and Al-Rasheed banks in collaboration with a foreign consultancy firm, paving the way for additional initiatives aimed at bolstering Iraq’s industrial, agricultural, real estate, and trade sectors.
Dr. Ma’oud stated, “Reforming and supporting the banking sector is a fundamental step for economic reform, as the integrity and development of this system secure progress in both real and financial investments, thereby revitalizing our financial markets.”
Key Banking Reforms
Dr. Ma’oud highlighted several pivotal areas of focus in the reform agenda:
-
Digital Transformation and Banking Infrastructure: The initial phase centers on enhancing digital capabilities and upgrading banking infrastructure. The introduction of advanced information and communication technologies will improve access to information and boost the efficiency of banking services. Critical measures will also be undertaken to bolster cybersecurity and update existing systems and protocols.
-
Restructuring Government Banks: The strategy includes a comprehensive restructuring of state-run banks to enhance their efficiency and market responsiveness, significantly improving competitiveness. The Iraqi government has engaged prominent international consulting firms, notably Ernst & Young, to facilitate the restructuring of Al-Rafidain and Al-Rasheed banks—two of Iraq’s oldest banking institutions. This initiative is approaching its final stages and is expected to extend to other banks in sectors such as industrial, agricultural, real estate, and trade.
Ernst & Young, founded in 1903, has established a significant footprint globally, operating in over 700 locations across 150 countries. Its presence in Iraq dates back to 1923, with a notable re-establishment in Baghdad in 2004 and expansions into Basra and Erbil by 2008.
- Electronic Payment Systems Development: Iraq has seen a marked shift towards electronic payment methods over the past two years, facilitated by government initiatives aimed at benefiting all citizens and fostering a more robust economic future. This transition supports enhanced transparency, reduces corruption, and ensures access to financial services for all segments of society, which is part of a broader vision aimed at promoting economic stability.
Fiscal Management and Revenue Diversification
On the financial reform front, Dr. Ma’oud emphasized the imperative of improving public finance management. The government has introduced several measures within the last two years to bolster transparency in fiscal operations. Through precise monitoring of expenditures and revenues, these initiatives have played a vital role in mitigating corruption and enhancing public trust in government institutions.
Moreover, the government has diversified its revenue streams to lessen dependence on oil revenues, focusing on developing non-oil sectors and promoting investment in small and medium enterprises.
Recent Developments in Banking Regulations
Regarding recent banking regulations, the Central Bank of Iraq denied allegations about local banks facing international sanctions. Reports had surfaced indicating potential bans on five local banks from conducting dollar transactions, as a result of discussions with U.S. Treasury officials aimed at addressing concerns over money laundering and related violations. The Central Bank had previously prohibited eight banks from engaging in dollar transactions following similar engagements.
These developments underscore the complexities and strategic maneuvers within Iraq’s banking sector as the government seeks to stabilize and enhance the efficiency of its financial institutions. Through targeted reforms and partnerships with international consulting firms, Iraq aims to navigate its economic challenges and lay a foundation for a more resilient financial landscape.
