Government banks inhibit business and investor confidence

Economist: Foreign Investment Withdrawal Hits $39 Billion

BAGHDAD, December 24 – A prominent economist reviewed two key points highlighted in international reports concerning the Iraqi economy’s trajectory over the past decade. These reports come at a time when Baghdad’s delegations are engaged in dialogues with the International Monetary Fund and the World Bank, amidst global crises and disputes over the exchange of the U.S. dollar in the Iraqi market.

The first point emphasized that most of the banking sector’s balances in Iraq are held by government banks. The second point addressed the unfavorable business environment, which led to foreign investors withdrawing approximately 39 billion U.S. dollars from the country.

Economist Manar Al-Obaidi, in a conversation with journalist Saif Ali monitored by 964media, discussed recent meetings between Iraq and the International Monetary Fund, as well as a detailed report by the World Bank. The World Bank’s report extensively discussed issues with Iraq’s expansive budget, focusing heavily on operational aspects without a clear economic structure.

Al-Obaidi highlighted that no economic report can definitively predict the future but stressed the importance of the findings diagnosed by international institutions. The World Bank’s report indicated that 80% of the assets in the banking sector are concentrated in two government banks (Rafidain and Rasheed), while the remaining 20% are spread across 65 other banks. This concentration in government banking, despite its inability to keep up with evolving demands for various banking services, has led to a decline in investor willingness to enter Iraq.

From 2011 to 2021, investments entered and left Iraq, with a net outflow of 39 billion dollars in foreign investments, according to the World Bank report. One of the main obstacles to the economic sector’s movement, as per the report, is the lack of clear financing for small and medium-sized projects, due to the dominance of the government banking sector.