📉 Economist Warns: Iraq’s Banking System Is Failing the Economy
“Iraq is not suffering from a liquidity crisis — it’s suffering from a misuse of liquidity.”
— Economist Manar Al-Obaidi
💰 Key Points:
Over 85% of bank deposits in Iraq are held in government banks.
As of June 2025, total deposits exceeded 115 trillion IQD:
95+ trillion IQD are non-interest-bearing (checking accounts).
Less than 20 trillion IQD are in savings or fixed deposits.
📌 The majority of funds are sitting idle, not circulating through the economy in a productive way.
📊 Low Lending and Misallocated Capital:
Only ~40% of total deposits have been issued as loans — a very low rate:
Jordan: 75%
Egypt: 85%
Turkey: 100%+
Of the loans:
66% went to consumer loans or real estate purchases.
Only:
4% to the industrial sector
3% to agriculture
Banks are not fueling Iraq’s economy — they’re acting like storage vaults.
⚠️ What’s the Risk?
Without reform:
Iraq’s banking system will continue to support consumerism, not production.
Economic diversification will stall.
Job creation and growth will remain minimal.
Efforts like currency reform or RV will be undermined.
🛠️ Economist's Solutions:
Redirect loans to productive sectors: agriculture, industry, renewable energy.
Develop state-backed financing tools for SMEs.
Raise interest rates on savings/fixed deposits to attract long-term capital.
Launch joint public-private funds for national projects.
Enhance bank governance, transparency, and accountability.
✅ Bottom Line:
Iraq doesn’t need more money — it needs to use its money smarter.
Fixing the government banking system is key to unlocking Iraq’s economic potential and rebuilding public trust.
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