Iraq's financial sector struggles to modernize
Shafaq News – Baghdad
Iraq is facing renewed debate over banking reforms as economists warn that decades-old laws are constraining both the banking sector and the wider economy.
Economist Abdulrahman Al-Sheikhli highlighted to Shafaq News that despite three decades since the political system changed, lawmakers have largely ignored economic laws, stressing that many of these regulations are no longer suited to the current stage.
He pointed to Law No. 111 of 1969, still in effect, which imposes a fine of 100 dinars (around 7 US cents), underscoring the need to modernize legislation to meet current economic requirements.
Highlighting that Article 28 of the Banking Law prohibits dealing in foreign currencies, Al-Sheikhli warned that it undermines the operations of banking institutions.
"We need to review all economic and banking laws, including those introduced by Paul Bremer during the US invasion of Iraq in 2003," he added, stressing that failure to do so could further impede growth.
Other experts note that passing entirely new legislation to reform the banking system would be time-consuming, suggesting it is more practical to update existing laws under the authority of the Iraqi government and the Central Bank of Iraq (CBI).
Reflecting on these challenges, Mudher Muhammad Saleh, economic advisor to the prime minister, explained to Shafaq News that "now is not the appropriate time to amend banking laws, as the legislative process is slow and rigid," adding that comprehensive legal reform could and should be pursued in the future.
Earlier, the CBI contracted the consulting firm Oliver Wyman to conduct reviews and studies of the Iraqi banking sector as part of a plan to modernize and develop the industry.
Economic watchdog Eco Iraq, however, cautioned that Iraq’s new banking regulations could marginalize local investors and open the door to foreign dominance of the financial sector.
