2026-07-07T23:36:28+00:00
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Shafaq News- Baghdad
Iraq’s foreign currency reserves have fallen 12 percent in
two years and remain at risk of further decline if oil prices drop below $60
per barrel, according to experts who spoke to Shafaq News on Tuesday. The
reserves stood at $97.8 billion in late April 2026, down from $111.7 billion at
the end of 2023, driven by the government’s heavy dependence on oil revenues
rather than diversified income streams.
Political science professor Najm Abdul Tarish warned that if
oil prices remain between $55 and $60 per barrel, while government spending
stays elevated, Iraq’s foreign reserves could come under pressure.
“Funds are unlikely to decline sharply in the near term but
could gradually erode if oil income continues to fall without meaningful
economic reforms,” he told Shafaq News, suggesting that protecting them
requires diversifying the economy, increasing non-oil returns, and encouraging
investment and domestic production rather than relying solely on oil, Tarish
argued.
According to former CBI Director General Mahmoud Dagher, the
impact of foreign currency reserves on ordinary Iraqis is indirect, and most
felt when speculation drives up demand for US dollars or confidence in the
market weakens. He said rumors about the economy or Iraq’s oil exports often
prompt citizens and traders to buy dollars, increasing demand and pushing up
exchange rates on the parallel market. Because Iraq relies heavily on imports,
any rise in the dollar’s value ultimately increases the cost of imported goods
and weakens the purchasing power of the dinar.
Speaking to Shafaq News, expert Mohammed Al-Hassani noted
that the Central Bank of Iraq (CBI) does not use its holdings to finance the
state budget. Instead, the funds are used to maintain monetary stability,
support the Iraqi dinar’s exchange rate, secure US dollars for imports, and
strengthen investor confidence in the country’s economy. He added that part of
the reserves is invested in safe, highly liquid financial instruments held by
international institutions to preserve their value and ensure they remain
readily available when needed.
Despite the concerns, the Prime Minister’s Financial
Adviser, Mudhir Mohammed Saleh, told Shafaq News that the CBI’s foreign
currency reserves remain within safe levels under international standards,
covering about 12 months of Iraq’s imports compared with the global benchmark
of three months. “The reserves give the Central Bank significant room to
intervene in the foreign exchange market and support the dinar, while noting
that exchange rate stability also depends on oil prices, government revenues,
the efficiency of the banking sector, and confidence in the economy.
Read more: Iraqi experts divided on reviving the oil-reliant economy