Government should seize U.S. sanctions as opportunity to reform banking sector, says advisor

BAGHDAD –  A senior advisor to Iraqi Prime Minister Mohammed Shia Al-Sudani called for leveraging the recent sanctions imposed on Iraqi banks by the United States as an opportunity to “restructure and regulate” the banking sector.

The U.S. Treasury Department has sanctioned at least 14 Iraqi banks, severing their access to international banking services and an Iraq-government foreign currency-selling electronic platform.

Mazhar Mohammed Salih, serving as a financial and economic advisor to Al-Sudani, articulated a comprehensive reform strategy targeting Iraq’s banking landscape, commencing with government-controlled banks. Salih underscored the pivotal role of public banks, which account for 85 percent of all banking activities in the country, in the ongoing reform initiatives spurred by the recent sanctions.

Emphasizing the administration’s commitment to safeguarding national capital and the imperative for systemic reform across banking institutions, Salih outlines a reform agenda extending to both government and private banks.

Pointing out the substantial capital held by private banks, constituting 78 percent of the Iraqi banking system’s total capital, Salih stressed the necessity for significant restructuring to align with global economic standards and bolster contributions to financing and economic development.

He highlighted the broader scope of the reform process, stating, “There is a reform process in Iraq that begins with the government banking sector and then the private sector,” framing the adversity faced by banks as “an opportunity for reform.”

Prime Minister Al-Sudani engaged in discussions on financial and banking reforms with U.S. Treasury officials during his visit to Washington in mid-April. Pressure from Washington has been mounting on his government to implement effective measures to curb the smuggling of U.S. dollars out of the country and regulate the operations of banks involved in such activities.