Iraq’s domestic debt reaches 117 trillion dinars, says Central Bank adviser

BAGHDAD — Iraq’s domestic debt has reached 117 trillion dinars following accumulated budget deficits from 2023 through 2025, while external debt stands at between $8 billion and $10 billion, according to Central Bank adviser Mahmoud Dagher.

In a televised interview, Dagher said Iraq has the right to seek loans from the International Monetary Fund as a contributing member, with interest rates not exceeding 1%. However, he explained that IMF lending requires an agreement with Iraq’s political and economic leadership to reform macroeconomic policies, including measures to address government spending, operating expenditures and public-sector salaries.

Dagher said the IMF is “not a charity,” adding that current spending and political quota arrangements should not leave future generations responsible for large debts. He cited Iraq’s previous IMF loan program between 2016 and 2018, saying the fund suspended the arrangement after the government failed to comply with agreed policy reforms and returned to populist decisions following a change in administration.

On public debt, Dagher said Iraq’s domestic liabilities had accumulated through actual budget deficits over the past three years. He added that the country’s external debt, estimated at $8 billion to $10 billion, would effectively be paid off by 2028.

Dagher also called for restructuring government subsidies and the public food ration system to ensure assistance reaches eligible households rather than being distributed equally across income groups. He questioned the practice of providing the same fuel and service subsidies to owners of modern eight-cylinder vehicles as to people driving smaller cars or families living in poverty.

Turning to banking procedures, Dagher said international financial transfers should normally take no longer than three to four days. He said the Central Bank had removed previous restrictions, including requirements for companies to have operated for six months or several years before becoming eligible to process transfers.

The bank also instructed four banks — TBI, Al-Ahli, Al-Mansour and Bank of Baghdad — to operate on Fridays to clear accumulated transfers, he said. Dagher added that approximately $3 billion in outstanding transfers dating from before the exchange rate adjustment had been settled at the previous rate to support market activity.

The Central Bank of Iraq said Tuesday that it had processed all import-related transfer requests pending before the Oct. 7 devaluation that met its conditions, and urged traders and companies to check with their banks that their transfers had gone through.

Addressing the gap between Iraq’s official and parallel dollar exchange rates, Dagher said the conditions driving the difference remained in place, making expectations of its complete elimination premature. He attributed part of the gap to Iraq’s trade with Iran, which cannot be financed through formal banking channels, including the SWIFT system, because of international sanctions. As a result, traders turn to the parallel market to obtain cash dollars for commercial transactions, he explained.

Since Oct. 7, the Central Bank buys dollars from the Finance Ministry at 1,500 dinars, sells to banks at 1,510 and sets the public rate at 1,520, up from 1,300, 1,310 and 1,320. Prime Minister Ali al-Zaidi told the parliament speaker and committee chairs on Oct. 8 that devaluation was necessary to keep paying salaries without more borrowing. The dollar sold for 169,000 dinars per $100 in Baghdad on Sunday, despite the government’s stated plan to bring the rate down to 155,000.

Dagher said Iraq could not provide assistance to Iran’s central bank outside established legal and official frameworks. He added that the difference between official and parallel exchange rates would persist as long as demand for dollars continued through unofficial channels to finance cash-based trade.

Prime Minister al-Zaidi said this month that his government took office in May with public debt of more than 208 trillion dinars. “We began our duties with public debt exceeding 208 trillion dinars, while the government was required to provide 10 trillion dinars each month. Despite the crisis, we secured salary payments,” said Zaidi.