Iraqi banking stability:
Baghdad (IraqiNews.com) – Economic Expert Manar Al-Obaidi has issued a strong warning regarding the structural stability of the Iraqi banking system, revealing a massive shift in assets away from foreign reserves and toward debt. The analysis, based on Central Bank of Iraq data for the first half of 2025, shows that while total banking system assets grew by 5% to approximately 275 trillion Iraqi Dinars, this growth is masking a fundamental risk.
The analysis highlights an alarming change in the composition of assets compared to the previous year. The share of foreign reserves, a pillar of the system’s security, dropped from 68% of total assets to 58% in H1 2025. Conversely, the combined share of government and private debt soared to 32% of total assets, up from 24% in the first half of 2024.
The primary driver of this shift is the massive growth in government debt, which saw a 116% jump compared to the same period last year. Al-Obaidi argues that this debt is primarily used to fund non-productive operational expenses, such as the public payroll, rather than being invested in revenue-generating projects.
Al-Obaidi warns that if this trend continues, the stability of the entire banking system is jeopardized. The continued rapid increase in government debt, which is absorbing the banking sector’s liquidity, threatens to push the total debt percentage past 50% of the system’s assets in the near future. This structural vulnerability undermines the financial security of the banking system and the value of the Iraqi dinar.
