Economic Challenges: Is Iraq Immune To Crises? Cash Reserve Example – Urgent
Baghdad Today – Baghdad
In light of global economic challenges and fluctuations in oil prices, attention is directed to the financial situation of Iraq and its stability during the current year, the Prime Minister’s Advisor for Financial Affairs, Mazhar Mohammed Saleh, confirmed in statements to Baghdad Today that the monetary reserve of the Central Bank of Iraq is “reassuring”, and there is no fear of a liquidity crisis during this year.
He pointed out that the global demand for oil will remain high, which enhances the financial stability of Iraq, which relies heavily on oil revenues, but in light of geopolitical tensions and uncertainty about the future of the global economy, the same question arises: Does Iraq really have a solid financial strategy that protects it from any sudden economic shocks?
Cash reserve: reassuring numbers but…
The appearance of Mohammed Saleh indicates that the Central Bank of Iraq manages cash reserves efficiently, which ensures the stability of financial liquidity, and the cash reserve is a fundamental pillar to maintain the stability of the exchange rate and ensure the ability to meet the financial needs of the state.
According to government sources, the central bank’s reserve has exceeded the $100 billion barrier in recent months, a figure seen as “reassuring” by financial experts, but total reliance on this reserve may be a double-edged sword, especially if the economy is under unexpected pressures, such as falling oil prices or political crises affecting domestic and external investments.
Oil prices: a stabilizing factor or a threat?
Saleh stressed that oil prices will not fall below $70 per barrel, considering this a positive matter for Iraq, which depends on oil revenues to finance its general budget, but economic observers warn that oil markets are characterized by instability, especially with the escalation of political tensions in the region and the possibility of a slowdown in the global economy.
Historically, Iraq witnessed severe economic crises when oil prices fell, as happened in 2014 and 2020, forcing the government to take austerity measures and resort to internal and external borrowing to fill the budget deficit, so any sudden drop in oil prices may bring Iraq back to similar scenarios.
Non-oil revenues: are you going in the right direction?
The financial adviser noted that non-oil revenues are “going properly,” referring to the government’s attempts to boost other sources of income, such as taxes, customs, and investments in non-oil sectors.
However, non-oil revenues still constitute a small percentage of the total national income, which raises questions about the government’s seriousness in achieving economic diversification. Some analysts believe that Iraq needs serious structural reforms in the industrial and agriculture sectors, in addition to enhancing the investment climate to attract foreign capital, which has not been concretely achieved so far.
Economic Challenges: Is Iraq Immune to Crises?
In his statements, Saleh explained that Iraq has overcome major crises such as terrorism and the COVID-19 pandemic, making him more capable of facing any future challenges, but at the same time acknowledged that “the collapse of the global economy or the fall in oil prices beyond our control,” an implicit recognition that Iraq remains vulnerable to external factors.
The challenges that may affect the Iraqi economy in the next phase lie in political and security tensions. Any escalation in the region may lead to the fluctuation of oil markets and negatively affect financial flows.
Also, administrative and financial corruption, as Iraq still faces great challenges in combating corruption, which is a major factor hindering economic development, in addition to unemployment and the weakness of the private sector. Unless the business environment is strengthened and investments are encouraged, the public sector will remain the main operator, which increases the pressure on the general budget, with the exchange rate and inflation factors, as despite the stability of the Iraqi dinar, any disturbances in global markets may lead to fluctuations in the exchange rate and increased inflation.
Is Iraq moving towards a developed economy?
The Iraqi government’s statements reflect optimism about the country’s ability to maintain its financial stability, but they do not hide the fact that the economy is still fragile in the face of external variables. Despite the current good monetary reserves and stable oil prices, the absence of a clear economic strategy to diversify sources of income puts Iraq in an insecured position in the long term.
The question remains: Can the government implement real reforms that guarantee long-term stability, or can the current optimism be just a period of calm before facing new challenges?
