IMPORTANT IRAQ NEWS: THE ROAD AHEAD FOR IRAQ’S UNDERDEVELOPED STOCK MARKET, 25 DEC

THE ROAD AHEAD FOR IRAQ’S UNDERDEVELOPED STOCK MARKET

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.

EXCERPT FROM MNT GOAT, 25 DEC

 EXCERPT FROM MNT GOAT

Once the parallel market is matched or close to the “official” CBI rate the next phase of the process that we have been waiting for now for over a year can happen. 

That phase is an in-country rate change at or just over a dollar. 

Next the currency switch-out to the newer lower denominations can begin. 

This was Dr Shabibi’s plan all along since its inception in 2011. 

He nearly executed it too in 2012-2013. 

 After the currency switch out and period to monitor for inflationary reactions with new rate, the move to reinstate the dinar back on FOREX would be next. 

In simple terms, this is when we go to the bank and not before. The reason for the “holdup” is that these steps could not yet occur based on the current situation.

So, there is no bad news in these articles today, but you must know what is going on to appreciate exactly the ramifications of this news.

I also want to say everything so far is working according to the CBI plan of getting ready  for this next phase. 

We just have to let it play out. I know it is not on our timetable and even what my CBI contact told us it “might happen” at this time. I can’t control it.

Holly Celiano's Christmas Update on Currency Rv: The RV will not occur until January 2025!! #iqd

 

IMPORTANT IRAQ NEWS: THE DOLLAR MARKET IS ON “ONE LEG”.. A ​​NEW MECHANISM AND THE EXCHANGE RATE IS THREATENED!, 25 DEC

 THE DOLLAR MARKET IS ON “ONE LEG”.. A ​​NEW MECHANISM AND THE EXCHANGE RATE IS THREATENED!

The Central Bank of Iraq is preparing to stop dealing with the electronic platform for dollar transfers abroad, at a time when experts have warned against raising the exchange rate to a higher level in light of the news circulating about this.

The electronic platform was launched in early 2023, and it represents a system for auditing dollar transfers before they are executed, instead of the audit that the US Federal Reserve used to conduct after execution.

Banks, companies and merchants in Iraq faced some challenges before adapting to the new method, but they finally underwent a series of trainings that the employees of these banks received before fully adapting to the platform’s work.

Exchange rate hike

In light of these moves, news has been raised about a move towards a new adjustment to the exchange rate, which has raised economists’ concerns about the potential impact of this move on the economic process in general.

Experts stressed that sudden changes in monetary policy could create additional confusion in the markets and undermine confidence in the financial system.

Economic expert Mustafa Akram Hantoush said, “Changing the exchange rate in the current situation is useless, because the problem is not in purchasing power, but in the demand for the dollar outside the platform due to small traders, trade with Iran, and some materials that are imported outside the platform due to high customs duties or their ban, in addition to the citizens’ desire to save the dollar.”

Hantoush added to Al Jarida that “it is better to find solutions to the increasing demand for the dollar outside the platform instead of resorting to changing the exchange rate, because that will complicate the monetary situation even more than it is now.”

clear policy

According to an official at the Central Bank of Iraq, dealing with the dollar file was based on various opinions built on a series of studies and field research.

The official, who preferred to remain anonymous, explained to Al Jarida that “the bank adopted two main approaches to address the crisis. The first is to expand the use of international currencies such as the Chinese yuan, the Indian rupee, the UAE dirham, and finally the Saudi riyal, with the aim of reducing dependence on the dollar. The second approach focuses on developing the operational capabilities of local banks to become more qualified to participate in transfer operations.”

For his part, banking researcher Mahmoud Dagher explained that “the fluctuation of the Iraqi dinar exchange rate came as a result of two decisions to reduce the value of the dinar in 2020 and then raise it in 2023, which represents a clear intervention in the fixed exchange rate system, which created ongoing economic confusion.”

Dagher told Al Jarida that “any new change in the exchange rate reflects the absence of benefit from previous mistakes, as wrong interventions in monetary policy lead to adverse results that increase the instability of the financial market.”

As for the economic expert, Adi Al-Alawi, he confirmed that “the biggest mistake that the government can make is to manipulate the dollar exchange rate through sudden decisions, because that has a direct impact on the national economy and shakes investors’ confidence in the financial system.”

Al-Alawi added to Al-Jarida that “the government’s continued taking of ill-considered decisions regarding the exchange rate will lead to the erosion of international and local confidence in the Iraqi economy, which will weaken the ability to attract the necessary investments to improve the economic reality.”

AJ : " The platform’s suspension is scheduled for the end of this year." , 25 DEC

 AJ

I saw this article this morning and wanted to share this with you. I'm heading out the door, see ya next week.

"The official noted that the platform’s suspension is scheduled for the end of this year." 👇

🇮🇶 A senior official from the Central Bank of Iraq (CBI) dismissed reports claiming that the bank's e-platform for foreign currency transfer had been officially suspended starting December 23, 2024.

Speaking to Shafaq News Agency on condition of anonymity, the source clarified that, “The auction operated as usual today, and no official decision to halt the platform has been made thus far.”

The official noted that the platform’s suspension is scheduled for the end of this year, as previously announced by the bank. However, “this step will not halt currency transfer operations as some have suggested. Instead, the process will transition to direct dealings between Iraqi banks and correspondent banks.”

The Central Bank representative pointed out that “many Iraqi banks are equipped to directly engage with correspondent banks, aligning with advanced international banking standards.”

https://shafaq.com/en/Economy/Source-Iraq-Central-Bank-did-not-halt-currency-transfer-platform

NADER FROM THE MID EAST: " Soon we'll be in every bank in United States" @DINARREVALUATION

 

IMPORTANT IRAQ NEWS: FLUCTUATING DINAR: ECONOMIC EXPERTS URGE ACTION AS DOLLAR SOARS IN IRAQ, 25 DEC

 FLUCTUATING DINAR: ECONOMIC EXPERTS URGE ACTION AS DOLLAR SOARS IN IRAQ

Iraq’s dinar continues its erratic trajectory against the US dollar, with no resolution in sight despite years of governmental and central bank efforts, experts attributed the instability to weak policies and unchecked market manipulation.

Root Causes of Volatility

The dollar is surging against the dinar at Baghdad’s main currency exchanges, Al-Kifah and Al-Harithiya, surpassing 1,510 dinars per $1. On the streets, exchange shops are marking up selling prices to more than 1,520 dinars.

“The instability in dollar prices reflects the Iraqi Central Bank and government’s inadequate monetary policies, which fail to address the core of the issue,” said Mustafa Faraj, an economic expert. “Their hesitant measures have left them unable to control the dollar’s value.”

Faraj cited US sanctions on neighboring Syria and Iran as a major factor. “The lack of legitimate trade channels with these countries, combined with restrictions on dollar transfers to them, has led to dollar smuggling, driving up its price,” he told Shafaq News Agency.

“When the dollar rises, it pushes up the cost of basic goods, food, and even commercial activity. This cascade of price hikes stems from a failure to find comprehensive solutions and punish manipulators,” Faraj explained.

Emerging Pressures

New dynamics have exacerbated the crisis. Ahmed Eid, an economic researcher, linked heightened demand for dollars to the fallout from the conflict in Syria. “The shift in Syria has disrupted the interests of militia leaders and influential figures, many of whom are now stockpiling dollars to secure alternative income streams,” he said.

Eid pointed to the closure of Syria’s border with Iraq as a catalyst, forcing traders to seek new suppliers in countries like Turkiye and Egypt. “This transition requires substantial dollar liquidity, which further squeezes the market,” he said.

Currency smuggling and money laundering also continue to erode market stability. “These illicit activities persist unchecked, compounding the dollar’s rise,” Eid warned.

Future Uncertainty Amid Policy Shifts

Concerns are mounting about the impact of Iraq’s planned phase-out of its electronic transfer platform for dollar transactions. Introduce d in early 2023, the platform was designed to monitor transfers more effectively. However, the Iraqi Central Bank announced in September that it would be discontinued by year-end.

“The Central Bank’s plan to shift dollar transactions exclusively to foreign banks with correspondent relationships is a blow to local banks,” said economist Ahmed Abdul Rabih. “Four dominant banks will monopolize the sector, sidelining smaller institutions and creating a bottleneck for dollar supply.”

“These banks will dictate the exchange rate, likely driving up prices. The Central Bank must advocate for local banks to establish accounts with international institutions like J.P. Morgan and Citibank,” Abdul Rabih urged.

Reassurances from the Central Bank

In response to public concerns, the Iraqi Central Bank has downplayed fears of major disruptions.

In a statement, it described the transition as part of a phased strategy to align with international standards, emphasizing that 95% of transfers had already shifted from the platform to direct banking relationships.

“The transition will be completed gradually, ensuring continuity,” the bank stated, adding that partnerships with foreign banks in China, India, Turkiye, and the UAE would facilitate trade using non-dollar currencies, such as the yuan and euro.

Thirteen Iraqi banks have already begun operations under the new framework, offering pre-approved transfers and enabling global payment systems for personal and commercial needs, the statement said. These steps aim to “stabilize the currency and curb inflation, reinforcing official exchange rates as the benchmark for legitimate economic activities.”

“The official rate reflects real market dynamics,” the Central Bank stressed, warning against unofficial rates driven by “those engaging in unauthorized practices.”

The bank emphasized that it has structured external transfer operations and the fulfillment of dollar demand along proper channels, aligned with international practices, standards, and the Anti-Money Laundering and Counter-Terrorism Financing Law.

“Providing these channels for all purposes at the official dollar exchange rate makes this rate the true benchmark for economic practices, as evidenced by price stability and inflation control. Any other rate traded outside these channels is considered irregular and utilized by those engaging in non-compliant or illicit practices who avoid official channels in their dealings. These individuals bear the additional costs of purchasing at higher rates than the official price to create the illusion of a disparity between the official and unofficial rates.” The statement concluded.

Despite reassurances, skepticism lingers among economic experts, who argue that without stricter enforcement and comprehensive reforms, the dinar’s fluctuations will persist. For many Iraqis, the cost of living remains tightly bound to the fate of the dollar.