From the United Nations Development Programme (UNDP):
The Turning Point: Iraq’s Leap into the Digital Economy
In a world increasingly defined by digital finance, Iraq has taken a transformative step with the Digital Payment Regulation No.2 of 2024.
This landmark policy marks more than just regulatory progress; it signifies a realignment of Iraq’s financial infrastructure with global standards.
Aimed at reducing the country’s overreliance on cash, this move fosters greater financial inclusion and economic transparency, hinting at a future of resilience and innovation within Iraq’s financial sector.
Beyond Compliance: A Shift Towards Better Financial Inclusion
The Central Bank of Iraq (CBI) has set a clear direction: digital payments are now an essential part of Iraq’s economic future. With funding from the United States Agency for International Development (USAID) in Iraq, and support from the United Nations Development Program (UNDP) Iraq, this regulation is a catalyst for ensuring that digital transactions are accessible not only to urban business hubs but also across diverse sectors, bridging public and private financial landscapes.
Iraq’s transition to digital payments will unlock a range of economic benefits, including streamlined operations, enhanced data visibility, and improved financial security.
“The collected amount from the digital payment reaches (7.6 Trillion Iraqi Dinars), after it was (2.6 Trillion Iraqi Dinar) in January, 2023”- Mohammed Shia’ Al-Sudani, Prime Minister of Iraq
Currently, Iraq’s cash-dependent economy presents significant challenges for financial circulation and transparency. The new Digital Payment Regulation disrupts this status quo, incentivizing businesses to adopt tools like POS systems, e-wallets, and online gateways. As the nation embraces this evolution, UNDP Iraq continues to support the government in developing a legal framework aligned with Sustainable Development Goals (SDGs) and international best practices.
“Iraq now possesses advanced infrastructure capable of accommodating electronic payment tools and financial services. We will soon transition to digital banks, where smartphones will drive various banking operations. This shift will facilitate financial accessibility of services for citizens, reduce opportunities for corruption and fraud, and provide crucial data at the national level regarding the nature of transactions, their content, oversight, and compliance achieved through this comprehensive system.” Ali Al-Alaq, Governor of Central Bank of Iraq
UNDP’s Strategic Role in Laying the Foundation
UNDP’s contribution extends beyond technical support to a strategic partnership designed to foster Iraq’s digital financial ecosystem. By working closely with the CBI, UNDP provided the technical expertise needed to craft policies that enable the shift to a digitally driven economy while safeguarding inclusivity and sustainability. This partnership highlights how collaborative, forward-thinking strategies can drive lasting structural change in emerging markets.
“This regulation is more than a technical leap forward; it is a foundational shift towards economic resilience, inclusion, and transparency in Iraq. By modernizing the financial system, we are opening pathways for every Iraqi to engage fully in the economy and contribute to a stable and innovative future.” Auke Lootsma, UNDP Iraq Resident Representative.
“USAID is proud to support Iraq’s journey towards digital finance as part of our commitment to fostering sustainable development and economic opportunity. This regulation reflects Iraq’s determination to build an economy that’s inclusive, resilient, and aligned with the needs of its people. We are honored to be a part of this transformative chapter in Iraq’s financial history,” said Erin Mone-Marquez, USAID/Iraq’s Acting Mission Director.
A Glimpse into the Future: Implications for Iraq’s Economy
The impact of this regulation reaches far beyond mere compliance:
- Strengthened Financial Governance: Reducing cash dependency minimizes risks of money laundering and corruption, creating a transparent transaction trail and fostering accountability across public and private sectors.
- Increased Economic Resilience and Investment Potential: By modernizing its financial system, Iraq becomes a more attractive market for foreign investors and opens doors for collaboration with global FinTech firms.
- Support for SMEs and Innovation Hubs: Cashless systems reduce operational barriers for startups and small businesses, empowering entrepreneurship and enabling Iraq’s talent to flourish.
More than a Policy Shift: A Cultural Transformation
Moving towards digital payments represents a profound cultural shift in Iraq, where cash-based transactions have long been the norm. Similar transitions in countries like India have underscored that this change is not just technical; it requires a transformation in public behavior and trust. Iraq’s journey towards digital adoption will depend on clear vision from its leaders and cohesive efforts from regulators, businesses, and consumers alike.
This regulation is a pivotal milestone in Iraq’s journey towards building a financially inclusive, transparent, and resilient economy. With the Central Bank leading, UNDP’s technical advisory, and USAID’s support, Iraq is positioned to create a robust digital economy. The path forward will require the collective commitment of all stakeholders to drive adoption and overcome challenges. If Iraq fully embraces this opportunity, it could emerge as a model for how thoughtful policy and collaboration can fast-track a nation into the digital age, unlocking vast potential for years to come.
