Iraq’s foreign reserves are at historic levels, providing crucial support for the country’s economic balance and stability. According to Midhat Mohammad Saleh, the Prime Minister’s financial advisor, Iraq’s reserves now cover over 100% of the currency in circulation. This highlights a strong position in maintaining economic equilibrium.
Saleh explained that a slight decrease in the Central Bank’s reserves, around 1%, is related to two key factors. First, there has been a significant increase in the Iraqi banking sector’s foreign currency reserves held abroad. These reserves are mainly used for trade financing and external transfers. As a result, the exchange rate of the Iraqi dinar has strengthened, leading to a noticeable drop in the US dollar’s value in the parallel market.
He also noted that the rise in the dinar’s value and the control over local liquidity levels have had a profound effect. These measures have limited the influence of the parallel market, leading to a sharp reduction in inflation and a highly stable price environment. This level of price stability is unprecedented in Iraq’s recent history.
The second reason for the small decline in reserves involves the government’s handling of monthly oil revenues. These revenues are exchanged into dinars for domestic expenditure, contributing to the foreign reserve pool. However, this process is also affected by the management of public spending and the pace at which foreign currency is converted into local currency.
Saleh pointed out that fluctuations in global oil prices, which recently fell to around $70 per barrel, have also played a role in the pace at which foreign reserves are replenished. Despite these challenges, the speed of foreign currency transfers for private sector trade has remained relatively high, although it has slowed slightly.
Despite these factors, Iraq’s foreign reserves continue to be at their highest historical levels. These reserves remain crucial for price stability and economic security. Saleh emphasized that the Central Bank of Iraq must closely monitor the balance of payments and ensure the reserves grow securely to maintain long-term stability.
He concluded by stating that Iraq’s foreign reserves now cover more than 100% of the currency in circulation and provide a commercial efficiency that exceeds 15 months of imports, far above the global standard of three months. The Central Bank remains the sole authority in managing Iraq’s monetary policy both domestically and internationally, with a strong commitment to balance and transparency to safeguard the country’s economic stability.
