Cairo: The Governor of the Central Bank of Iraq, Dr. Ali Al-Alaq, emphasized the complexity of maintaining financial and banking stability, ensuring public financial sustainability, and curbing inflation during a lecture at the Fifth Regional Conference of the Al-Baraka Forum for Islamic Economics.

According to National Iraqi News Agency, Al-Alaq noted that Iraq faces significant economic pressures, with over 90% of its public revenue coming from oil exports, a source highly susceptible to global price fluctuations. This dependency creates volatility in revenue and financial stability, necessitating structural solutions.

Al-Alaq highlighted Iraq’s limited economic diversification, resulting in a heavy reliance on imports, which exerts pressure on the dollar and exchange rates. Despite these challenges, monetary policy in Iraq has successfully balanced price stability, liquidity management, and economic stimulation.

He also discussed the challenges posed by public spending, particularly on salaries and subsidies, which are difficult to reduce without potential social repercussions. The Central Bank aims to maintain monetary stability to protect the country’s social fabric, while efforts are underway to develop non-oil revenues and reduce dependency on oil.

Al-Alaq affirmed that exchange rate stability is a critical objective, noting that Iraq has increased its foreign reserves and linked them to comprehensive monetary policies, successfully reducing the inflation rate to about 1%. He revealed plans for banking sector reform in collaboration with an international company, including revising bank licenses to enhance the system’s efficiency.

On the topic of Islamic bonds, Al-Alaq mentioned the absence of such instruments in Iraq but noted a comprehensive draft law has been submitted to Parliament, potentially opening new financing and investment avenues.

He also stressed the importance of continuous international dialogue between creditors and debtors, proposing the creation of a regional platform to facilitate negotiations and bridge gaps. Al-Alaq cited international studies indicating significant losses in debt settlements due to poorly considered financing terms or delays, advocating for negotiating platforms to reduce these losses and improve international cooperation.