The IMF Mission Commends The Central Bank Of Iraq

 
June 25, 2025   The International Monetary Fund (IMF) mission, led by Jean-Guillaume Poulain, which   met with the Central Bank of Iraq (CBI) from May 4 to 13, 2025, commended the CBI's work in several areas. It confirmed that the CBI has made progress in absorbing excess liquidity by  increasing the issuance of short-term debt instruments  (CBI drafts and  Islamic certificates of deposit), adjusting subscription limits for banks in CBI auctions, and  improving liquidity forecasting tools and practices. 

The statement issued by the International Monetary Fund stated that the mission commended the efforts of the Central Bank of Iraq to successfully transition to the new trade finance system, indicating that commercial banks now process trade finance transactions entirely through their relationships with correspondent banks.

The Central Bank of Iraq has achieved significant progress by transitioning to the new system for financing foreign trade through correspondent banking channels,  instead of relying on the daily dollar auction.
 
This development has contributed to enhancing banks ' compliance with international transparency requirements, such as
     OFAC regulations and others, and  improving their relationships with global correspondent banks.
 
This step has resulted in
     narrowing the gap between the official dollar price and its parallel price, indicating relative success in
     curbing illegal speculation and
     reducing currency leakage.
 
The foreign exchange management methodology has become more effective compared to the past,
especially with the  Central Bank of Iraq continuing to take complementary measures, such as requiring traders to submit genuine import invoices and  simplifying procedures for obtaining hard currency for legitimate importers.
 
In parallel, the mission welcomed the   progress made in the use of digital technology and the  Iraqi authorities' intention to implement a comprehensive reform of the banking sector, calling for its completion to be accelerated without delay.
 
The Iraqi government,   with technical support from the International Monetary Fund and other international bodies, has begun implementing initial steps to reform government banks, including
          auditing the quality of assets,
          estimating the size of non-performing loans, and
          developing a draft plan to restructure the two largest government banks (Rafidain and Rashid) financially and administratively.
 
The Iraqi financial sector has also witnessed an  increasing trend towards digitization and the adoption of modern financial technology, whether in   electronic payment services or the launch of   banking platforms via the Internet and mobile phones. 

The International Monetary Fund believes that these
     technical improvements, along with
     steps to enhance cybersecurity in banks,
     promote financial inclusion,
     expand private banking activity, and
     restructure government banks,
 
will
     enhance the efficiency of financial services and
     increase foreign correspondents' confidence in the Iraqi banking sector.

The report also noted the
     expansion of private banks' activity in trade finance and small business financing, with expectations of
     further increases if obstacles are removed.
 
Initiatives to
     enhance financial inclusion,
     modernize electronic payment systems, and
     reduce reliance on cash in the economy
are also crucial to strengthening banking depth.
 
The Central Bank of Iraq launched a national financial inclusion strategy during the first half of 2025.
 
The report also included important recommendations to  enhance financial stability and  facilitate the transfer of monetary policy effects to the real sector, including:   reducing the phenomenon of dollarization, in which Iraq has made significant progress over the past two years;
 
     the importance of accelerating the completion of the
          comprehensive restructuring plan for banks to enhance their solvency; the importance of
          strengthening corporate governance for banks,
          developing digital infrastructure and cybersecurity for the financial sector;
          strengthening the role of private banks in financing economic development; and
          continuing to improve anti-money laundering and counter-terrorism financing procedures.
 
It is also important for the Central Bank of Iraq to continue increasing the issuance of short-term securities to ensure better management of excess liquidity. Central Bank of Iraq  Media Office  https://cbi.iq/news/view/2916