📉 Economist Warns: Iraq’s Banking System Is Failing the Economy

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📉 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
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~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.