Is The Central Bank Leading Iraq Towards An Economic Crisis?, 23 JULY

July 22, 2024 Last updated: July 22, 2024

A Financial Report Reveals And Reality Confirms... Is The Central Bank Leading Iraq Towards An Economic Crisis?
 
Al-Independent/- Informed sources said that the financial policy of the Central Bank of Iraq faces sharp criticism from financial experts and economic observers, amid a continuous rise in operational costs and a noticeable increase in expenditures.
 
According to the financial situation tables as of 6/30/2024 published on the Central Bank’s website, the financial statements show that there is a clear imbalance.

The financial report revealed a slight increase in total assets, which reflects an apparent stability in the bank’s financial performance.
 
However, the financial statements showed some points that call for criticism and questioning the  effectiveness of the financial management of the Central Bank of Iraq.
 
The report indicated that gold reserves rose to 14,672,164,921 thousand Iraqi dinars from 14,475,189,559 thousand Iraqi dinars.
 
Although this strengthens the bank's position, the question remains about the  adequacy of these reserves in the face of potential economic crises.
 
As for the bank’s balances with banks outside Iraq, they increased to 2,011,145,122 thousand Iraqi dinars from 1,827,075,442 thousand Iraqi dinars, which reflects a diversification of assets, but the question remains about the risks associated with relying on foreign banks.
 
Foreign currencies witnessed a noticeable increase to 24,688,182,816 thousand Iraqi dinars from 23,838,913,348 thousand Iraqi dinars, which enhances foreign exchange reserves, but how these reserves are managed effectively must be monitored.
 
In terms of expenses, currency issuance expenses increased to 10,588,686 thousand Iraqi dinars from 9,897,229 thousand Iraqi dinars, raising questions about the  effectiveness of managing issuance costs.
 
Foreign currency valuation differences also increased significantly to 188,168,707 thousand Iraqi dinars from 151,874,481 thousand Iraqi dinars, which indicates fluctuations in the value of foreign currencies that may negatively affect financial stability.
 
Also, general administrative expenses increased to 52,643,698 thousand Iraqi dinars from 39,692,228 thousand Iraqi dinars, which reflects an increase in operational costs that need to be carefully reviewed to ensure that resources are not wasted.
 
In terms of profits and losses, interest and commission income increased to 2,968,280,621 thousand Iraqi dinars from 2,495,021,601 thousand Iraqi dinars, which reflects a good performance,
 
but the question remains about the sustainability of these revenues in light of the economic challenges.

Total interest expenses increased to 2,684,950,171 thousand Iraqi dinars from 2,271,995,595 thousand Iraqi dinars, which indicates an  increase in interest costs that need better management.
 
As for the final budget, the exported currency rose to 102,311,666,715 thousand Iraqi dinars from 100,791,930,154 thousand Iraqi dinars, which may indicate inflationary pressures if not properly monitored.
 
Bank deposits increased to 54,434,578,910 thousand Iraqi dinars from 47,851,676,798 thousand Iraqi dinars, which reflects an increase in deposits,
 
but the stability of these deposits in the long term must be verified.
 
strength point:
 
The report showed an increase in total assets, reflecting the central bank's apparent financial stability.
 
Gold reserves  and external bank balances also increased, which significantly strengthens the bank's monetary position. In addition,
 
interest and commission income witnessed a significant increase, reflecting a good performance in the bank's financial returns.
 
Weaknesses and doubts:
 
Despite the apparent stability, outstanding outstanding debts amounting to 530,499,124 thousand Iraqi dinars did not change, indicating challenges in debt collection.
 
Administrative expenses also increased to 52,643,698 thousand Iraqi dinars, which may indicate poor management of operational costs.
 
In addition, Central Bank transfers decreased to 0 from 5,110,240,000 thousand Iraqi dinars, raising questions about the efficiency of liquidity management.
 
Finally, the balances of government institutions decreased to 10,750,719,726 thousand Iraqi dinars from 13,353,688,408 thousand Iraqi dinars, indicating challenges in government financing.

Recommendations:
 
To improve the financial position of the central bank, it is important to develop effective plans to collect outstanding debts to reduce financial risks.
 
Operational costs  must also be reviewed and controlled to avoid any unjustified increase in expenses.
 
It is necessary to establish policies to monitor currency issuance to ensure that unwanted inflation does not occur.
 
Finally, the reasons behind the decline in the balances of government institutions must be studied and the necessary measures taken to strengthen government financing.
 
Based on this analysis, it is clear that the central bank needs improvements in several aspects to ensure actual financial stability and effectiveness in resource management.
 
To view the financial situation table, click here: Central Bank of Iraq       
                 https://mustaqila.com/wp-content/uploads/2024/07/البنك-المركزي-العراق.pdf
 
https://mustaqila.com/تقرير-مالي-يكشف-والواقع-يؤكد-هل-يقود-ا/