The Road ahead for Iraq’s underdeveloped Stock Market
Shafaq News/ Iraq’s stock market considered a vital pillar for channeling savings into investments, remains underdeveloped and overshadowed by regional counterparts.
Authorities are striving to revitalize the market to attract investors and promote economic diversification, however, challenges such as political instability, limited industrial and agricultural sectors, and bureaucratic hurdles continue to impede progress.
Market Overview
The Iraq Stock Exchange (ISX) was established in 1992 as the Baghdad Stock Exchange under Law No. 24 of 1991. It was later renamed in 2003, listing 113 private and mixed companies at its inception. However, despite its long history, the ISX lags behind neighboring markets in trading volume and overall activity.
Foreign investors remain hesitant, citing Iraq’s political and economic instability, as well as complex administrative and legal procedures for opening accounts and transferring profits. These barriers contribute to the market’s small size and limited appeal.
Economic Challenges and Market Dynamics
Muzher Mohammed Saleh, financial advisor to Iraq’s prime minister, highlighted the structural issues plaguing Iraq’s economy. “The country inherited a mono-reliant economy heavily dependent on oil revenues, exacerbated by decades of war, sanctions, and economic isolation,” Saleh told Shafaq News.
“Unfortunately, the industrial and agricultural sectors, which are essential for diversifying the stock market, are significantly weak.”
These two sectors collectively contribute only 6–7% of Iraq’s GDP, according to Saleh, with most activities being individual rather than corporate. He revealed that the stock market’s underdevelopment mirrors the broader structure of Iraq’s economy, where banking institutions dominate due to the liberalized, oil-dependent economy.
Notably, over 50% of ISX’s activity stems from banking institutions.
“The government’s new economic strategy focuses on fostering a production-oriented partnership between the public and private sectors to enhance economic diversification,” Saleh added. He noted that the success of the stock market hinges on achieving broader economic diversity and strengthening foundational sectors like industry and agriculture.
Market Constraints
While regional markets in the Gulf and North Africa have modernized rapidly, Iraq’s stock market has struggled to keep pace. Broker Mohammed Madloul pointed out that neighboring markets like Egypt and the UAE provide 24-hour stock price tickers in public spaces, allowing citizens to trade shares outside traditional hours. By contrast, trading in Iraq is restricted to specific hours, limiting transaction opportunities.
“In Iraq, the market’s size and activity are constrained,” Madloul said. “Many stocks trade at values below one Iraqi dinar, reflecting the limited scope of investments.” However, he acknowledged some progress in the banking sector, noting that the market capitalization of listed companies grew from 6.88 trillion dinars (about $5.2 billion) in 2021 to 10 trillion dinars in 2024 (about $7.6 billion.)
“This growth highlights a potential for expansion, albeit focused heavily on the banking sector.”
Weak Private Sector
Economic expert Durgham Mohammed Ali attributed the ISX’s small size to the lack of large companies and a strong private sector in Iraq. “The market reflects the weak state of Iraq’s developmental sectors and the public’s lack of trust in it,” Ali told Shafaq News. “The ISX remains technically underdeveloped compared to Gulf markets.”
Ali criticized the lack of efficient investment portfolio management and regulatory constraints imposed by the ISX’s oversight body. “These restrictions limit the operations of brokerage firms and discourage robust investment activities,” he said. “The performance of the market is directly tied to the efficiency of listed companies, which remain weak.”
Modernization Efforts
Despite these challenges, efforts are underway to modernize Iraq’s stock market. Taha Ahmed Abdul-Salam, ISX’s executive director, stressed the importance of stability and long-term corporate vision for attracting investors.
“The number of listed companies has increased from 105 to 107, and we are working to add more,” Abdul-Salam told Shafaq News. “This expansion is essential for attracting new investors.”
Abdul-Salam revealed that the ISX has signed an agreement with the Egyptian Exchange to implement a new Order Management System (OMS), enabling investors to trade via smart devices. “We expect to launch this system by June or July next year,” he said. This modernization is seen as a critical step toward making the market more accessible and competitive with regional counterparts.