Iraq’s Central Bank Sparks Outcry Over New Electronic Card Fees

Central Bank of Iraq Increases Electronic Card Fees, Eliciting Economic Concerns

The Central Bank of Iraq announced on Thursday an increase in fees associated with the issuance of electronic payment cards, as well as fees for electronic fund withdrawals, including salary disbursements. This decision has prompted significant criticism from economic specialists and social media activists within the country.

Experts in economic affairs argue that this move poses a considerable obstacle to Iraq’s progress toward a digital economy, potentially impeding the uptake of electronic payment methods and compelling citizens to rely more heavily on cash. Critics point to the risk of corruption and the unjust enrichment of corrupt entities at the expense of vulnerable populations, labeling the fees as detrimental to the public’s financial well-being.

Economist Safaa Al-Shammari expressed concerns on social media, stating that the Central Bank’s decision undermines electronic payment advancements. Rather than acting as a facilitator for digital economic growth, the latest fee structure serves as a barrier, likely pushing both citizens and merchants to favor cash transactions. Al-Shammari noted that such fees appear designed to safeguard the profits of private banks rather than to serve economic interests or consumer welfare. He emphasized that banks should be incentivized to lower fees progressively, rather than being allowed to exploit consumers.

Al-Shammari further articulated that while other nations work to enhance electronic payment services and create user-friendly alternatives, this fee increase places severe limitations on the sector. He posited that the Central Bank’s favorable fee structure motivates banks to focus on profit over competition and innovation.

He cautioned that as the costs associated with electronic payment rise, the appeal of cash transactions increases, which in turn fosters opportunities for tax evasion and unregulated currency exchanges. If the fee increase is not re-evaluated, Al-Shammari warned, Iraq risks decades of technological stagnation in finance, with cash remaining dominant while global markets advance into the digital economy.

Opposition leader Omar Abdul Sattar echoed similar sentiments, noting on social media that the Central Bank’s decision represents a burdensome increase of 2,000 dinars on employee salaries due to a projected lack of liquidity and a looming financial crisis.

The Central Bank has directed Iraqi banks to increase the fees for issuing or renewing electronic payment cards. According to internal documentation, the fee for the initial issuance of a salary card has risen from 10,000 to 15,000 dinars. Additionally, fees for replacing a MasterCard upon expiration have similarly increased to 15,000 dinars from 10,000 dinars. The cost for issuing a card for damaged or lost allowances has escalated to 25,000 dinars, while the fee for salary withdrawals via MasterCard now stands at 2,000 dinars, previously set at 1,000 dinars.

In terms of cash withdrawal fees from Point of Sale (POS) devices, these have increased to 2,000 dinars per million, also doubling the previous charge.

This latest decision comes on the heels of controversial comments from the Central Bank Governor, Ali Al-Alaq, which previously stirred public outcry and prompted strikes at salary payout locations across the nation. Following backlash, the Bank revised its statements, dismissing previous claims.

It is crucial to note that the Parliamentary Finance Committee recently identified a genuine financial crisis facing Iraq, although Minister of Finance assurances indicated that employee salary funding would remain assured, despite potential delays in disbursements.

In an effort to respond to growing financial pressures, Iraq has approved an increased budget for 2024, despite record spending in the previous year, including the hiring of over half a million new employees in the public sector and ongoing infrastructure development initiatives requiring significant investment.

Moreover, government financial advisor Mazhar Muhammad Saleh cautioned in September 2024 of a looming budget crisis for 2025, attributing it to declining oil prices, Iraq’s primary revenue source. Saleh stated that while 2024 appears manageable, stricter fiscal discipline will be essential in the upcoming year.

Table of Revised Fees:

This development signifies a critical junction for Iraq’s economic direction, particularly as it grapples with challenges arising from digital payment implementations and broader financial stability. The impact of these fee increases will need careful monitoring to gauge their implications for economic growth and consumer behavior within the country.