AI research reveals Iraq’s 2024 budget is incomplete, pending a supplementary budget for reforms and development, with significant focus on digitization and infrastructure.
Highlights
📈 Iraq’s 2024 budget is approved but incomplete due to missing supplementary funds.
🏗️ The government is prioritizing infrastructure and social services through a 5-year development plan.
💻 Digitization efforts, including QR codes in healthcare, are being emphasized.
🗓️ Key decisions about the budget are expected around October 2024.
🌍 Iraq is progressing towards international economic reforms and potential currency revaluation.
💡 AI research suggests Iraq’s economic reforms may be more advanced than publicly disclosed.
📊 The supplementary budget is crucial for financing large-scale projects and ensuring stability.
Key Insights
📊 The Iraqi government has already approved the 2024 budget but needs to finalize the supplementary portion, indicating ongoing reform efforts. This suggests a commitment to economic stability and development.
🌱 The focus on a 5-year development plan highlights Iraq’s intention to invest in infrastructure and social services, essential for long-term growth and modernizing the economy.
🔗 Digitization initiatives, such as QR codes in healthcare, show Iraq’s commitment to modernizing its systems, which can enhance efficiency and transparency.
⏳ The timing of budget decisions around October 2024 could align with significant economic reforms and potential currency adjustments, signaling a strategic approach to economic management.
🌐 Iraq’s steps towards international reforms and cooperation indicate a desire for greater economic integration, which may bolster investor confidence and attract foreign investment.
🔍 AI analysis suggests Iraq may be further along in its economic plans than publicly acknowledged, indicating potential for a controlled currency revaluation to enhance purchasing power.
📅 The supplementary budget’s role in financing critical infrastructure projects demonstrates the government’s focus on both immediate and long-term economic stability.
Government's Initiative to Modernize Banking Sector
Iraqi Banks: A Classic Mentality That Prevents Keeping Pace With Global Development
As of September 19, 2024, Iraqi banks continue to struggle with a classic mentality that hinders their ability to align with global financial standards. This resistance to change is rooted in a preference for the "government" over "national" development, a mindset that has persisted despite Iraq's need for a robust banking sector to support its economy.
In a significant step toward addressing these challenges, Prime Minister Mohammed Shia Al-Sudani announced the establishment of a high-level committee aimed at aligning Iraqi banks with international financial requirements. The committee's formation reflects the government's commitment to economic reforms and the recognition that Iraq needs strong domestic banks adhering to financial standards to play a key role in the country's development.
Challenges and Opportunities
The Iraqi banking sector faces significant challenges, including corruption, a lack of basic services, and a feeble private sector and foreign direct investments (FDIs). Despite these hurdles, there are opportunities for growth, as evidenced by the interest of several Arab and international banks in cooperating with the Iraqi government on developmental plans.
Economic Dependency on Oil
Iraq's economy remains heavily dependent on oil, with oil revenues accounting for over 99% of exports, 85% of the government's budget, and 42% of gross domestic product (GDP). This overreliance on oil exposes the country to macroeconomic volatility and restricts fiscal space for countercyclical policy.
Diversification Efforts
Under Al Sudani's leadership, the Iraqi government is increasingly exploring public-private partnerships (PPPs) to finance major development projects.
Strategies include diversification efforts to reduce reliance on oil revenues and foster infrastructure development, partnerships for sustainable growth, and economic and financial sector reforms to attract foreign investments.
Budgeting Challenges
The recent passage of the 2023, 2024, and 2025 federal budgets marks a significant milestone, but the economy's heavy dependence on oil sales and the volatility of the global oil market remain major concerns.
Iraqi Banks...A Classic Mentality That Prevents Keeping Pace With Global Development By Preferring The "Government" Over The "National"
Reports and analyses Central Bank US sanctions Iraqi banks Private banks 2024-09-17 01:44 -- Shafaq News/ Iraq is moving towards restructuring government banks, after this body has become unable to provide modern banking services and has become burdened with a deep legacy of accumulated burdens, credit defaults and other problems. The restructuring demands came after years of pressure and demands from the International Monetary Fund to restructure the Iraqi government banks, which hold most of the country's deposits, to develop its banking system and be able
to enter the global banking market and make it more compatible with the economy
Acquisition of government banks The Prime Minister’s Advisor for Economic Affairs, Mazhar Muhammad Saleh, said in an interview with Shafaq News Agency, “The structuring of the banks came in accordance with the government curriculum that outlined the features of comprehensive banking reform, as government banks dominate 88% of the banking system’s investments, and only 12% remains for the private banking system.” Of these investments, therefore, the competitive foundations of the banking market are considered incomplete unless government banks are placed on the rules of market operation in terms of efficiency, administrative governance, and developing levels of compliance similar to international banking,” noting that
“the reform will include private banks with the same standards.” He added, "The basics of reform in private banks are viewed from the perspective of what is called financial depth, and one of the most important indicators of that depth is (the ratio of cash credit granted to the total deposits in private banks), but in contrast, we find that the market share is no more than 63 private banks." These credit and creative operations still only account for 15%, despite the government banking system’s acquisition of 85% of the credit activity, deposits, and investment banking operations, which indicates the dominance of its assets or assets over the total assets of the banking system.” He pointed out that "the time has come to reform the banking sector, both governmental and private, in a way that achieves harmony, unity and high competitiveness in the banking market, as well as its governance and digital integration with the banking market in the world.
This is what the banking reform policy that the government is currently adopting is working on, in coordination with the stakeholders included." “With the reform steps and its current program in the government and private banking sectors.”
The process of studying the structure of Iraqi banks began after Prime Minister Muhammad Shiaa Al-Sudani met with a delegation from the international company Ernst & Young, where he directed, on 1/27/2023, the implementation of a plan to develop the performance of Rafidain Bank extending for eight months, through the international company. Difficulty in the structuring process The former director of the Central Bank of Iraq, Mahmoud Dagher, said in an interview with Shafaq News Agency, “Government banks and the process of restructuring and developing them and making them consistent with modern banking work is very difficult for several reasons, including that these banks have become more like a treasury for distributing salaries to state employees than they are banks for carrying out a process.” Banking". He continued that other reasons are that the technical level in these banks is almost non-existent. Indeed, these banks, especially Al-Rafidain and Al-Rashid Banks, had it not been for the electronic payment companies that support them, they would not have been able to complete any work. Therefore, they would not have worked without these companies, in addition to the huge number of their branches and the large number of employees present. This makes it difficult to change the reality of these banks.” He pointed out, “The presence of international sanctions and the presence of decisions of courts abroad, proving the creditors of some government banks, which are not resolved, and this is the reason for imposing international isolation on them, and therefore they cannot deal internationally,” stressing that “it is absurd to spend huge sums of money that do not lead to decisive results, as All the costs spent on these banks will not lead to restructuring in order to coordinate the work of government banks, especially Al-Rafidain, Al-Rashid, and some specialized public banks, in a way that parallels the work of modernization and technological development that took place in banks such as the Iraqi Trade Bank.” The Rafidain and Al-Rashid government banks were subjected to international sanctions during the nineties of the last century following the invasion of Kuwait by Saddam Hussein’s regime, and they are still imposed on it in international dealings with them, especially with regard to the issue of financial transfers.
Old banking system Economist Bassem Jamil Antoine said in an interview with Shafaq News Agency, “Government banks have for a long time been operating within an old banking system without modernization, and these banks must keep pace with international banks,” adding at the same time that “these banks are the safety valve.” He added, "These banks remain in need of development, eliminating administrative routine, and having employees undergo training courses to keep pace with developments that have occurred in international banks," noting that "banks are not stores of cash, but rather they must provide advanced credit banking services." He stressed that "the idea of restructuring banks has been proposed for twenty years, and ideas and studies were presented, but they were not adopted," stressing that "the bank needs security and administrative stability and independence in work." The Ministry of Finance owns six government banks: Al-Rafidain Bank, Al-Rasheed Bank, Al-Nahrain Islamic Bank, Agricultural Bank, Industrial Bank, and Iraqi Trade Bank. Al-Rafidain Bank is an Iraqi government bank, founded in Baghdad in 1941, as the first Iraqi commercial bank. It has 146 branches inside Iraq, and some other branches are spread outside it in Jordan, Egypt, the United Arab Emirates, Lebanon, Bahrain, and Yemen. Al-Rasheed Bank is an Iraqi government bank, founded in Baghdad in 1988, as an Iraqi commercial bank, with 162 branches spread inside Iraq. https://shafaq.com/ar/تقارير-وتحليلات/المصارف-العراقية-عقلية-كلاسيكية-تصد-مواكبة-التطور-العالمي-بتفضيل-الحكومي-على-ال-هلي
In September 2024, a committee meeting focused on boosting non-oil revenues through tax and customs reforms to enhance economic stability.
Highlights
📅 September 2024 meeting of the Parliamentary Finance Committee.
🏛️ Collaboration with heads of the General Commission for Taxes and Customs.
⛽ Emphasis on diversifying beyond oil dependency.
📈 Potential to optimize tax and customs revenue identified.
🤝 Builds on previous engagements with various ministries.
🌐 Strategy aims for comprehensive economic diversification.
💪 Proactive steps towards a more stable economy.
Key Insights
📊 Diversification is essential: Relying solely on oil leaves economies vulnerable to price fluctuations and global market dynamics. A diversified revenue base ensures stability and resilience.
🏦 Tax and customs reforms are pivotal: Streamlining these processes can enhance revenue collection, contributing to economic growth without increasing tax burdens on citizens.
💼 Collaborative efforts are key: Engaging multiple ministries ensures a holistic approach, pooling resources and expertise to achieve common economic goals.
📉 Reducing economic vulnerability: By broadening revenue streams, countries can protect themselves from external shocks and economic downturns.
🚀 Enhancing sustainable growth: Non-oil revenues can support investments in infrastructure, education, and technology, leading to long-term development.
🔄 Continuous engagement is necessary: Ongoing discussions and evaluations of strategies are crucial to adapt to changing economic landscapes.
🌍 Global competitiveness: Diversification not only stabilizes the economy but also positions the country as a more attractive destination for foreign investment.
Shafaq News/ On Thursday, Iraqi Prime Minister Mohammed Shia Al-Sudani announced the establishment of a high-level committee aimed at aligning Iraqi banks with international financial requirements.
Al-Sudani’s media office reported that al-Sudani met with the Chairman of the Private Banks Association and several directors of private banks. During this meeting, he reviewed the challenges facing Iraq’s banking sector.
Al-Sudani highlighted the government’s actions to support the private sector in general, and the banking sector in particular, as part of the government’s priority of advancing economic reforms.
According to the media office, “The Prime Minister emphasized that Iraq needs strong domestic banks that adhere to financial standards and play a key role in the country’s development. The Prime Minister also emphasized the importance of the Private Banks Association aligning with government initiatives and actively leveraging available opportunities. He noted that several Arab and international banks, whose representatives have visited Iraq, are ready to cooperate with the government in implementing its developmental plans.”
Al-Sudani announced that “the Central Bank of Iraq has contracted with Oliver Wyman to help develop the banking and financial sector”
Furthermore, the Prime Minister “directed the Private Banks Association to foster balanced relationships with financial institutions, Arab banks, and investors to strengthen the banking sector. He also called for drafting a resolution to be submitted to the Council of Ministers, which would mandate government ministries to provide facilities that support the banking sector in Iraq,” as per the media office.
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Article: "Al-Sudani: Iraq today is on the right path"
Quotes: "We have started establishing and implementing the development road project, which will transform Iraq into an open country.; "Many capitals want to invest in Iraq...Iraq is witnessing recovery and stability and everyone needs his return"; We have made real reforms in the tax and banking system. There is no spot on Iraqi territory outside the control of our security forces, and we have directed the preparation of a comprehensive plan to secure the path of development."; "Iraq today is on the right track".
