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Foreign Reserves Support Economic Stability in Iraq

Foreign Reserves Support Economic Stability—this key phrase captured expert insight shared by the financial advisor to the Iraqi Prime Minister. On Wednesday, Dr. Mudhhir Mohammed Saleh confirmed that Iraq’s foreign currency reserves remain at their strongest historical levels. These reserves continue to act as a critical foundation for the country’s economic stability.

Dr. Saleh explained that the recent 1% dip in the Central Bank’s reserves is minor. He attributed it to two primary factors. First, Iraqi banks have increased their foreign cash holdings abroad to support trade and transfers. This move strengthened the Iraqi dinar in parallel markets and reduced the dollar’s market price. As a result, the local currency gained noticeable value.

Second, he discussed how public finance operations affect the reserves. The government exchanges oil revenues from dollars to dinars to fund spending. This process ties closely to reserve strength. When public spending slows down or becomes more disciplined, the conversion of foreign currency into local liquidity also slows. This directly impacts reserve growth.

Despite minor fluctuations, Foreign Reserves Support Economic Stability in a measurable way. Saleh highlighted improved control over local liquidity and a stronger external value of the dinar. These factors, combined with low inflation rates, have created price stability across Iraq.

However, Saleh warned about the global oil market’s recent volatility. Oil prices have hovered around or below $70 per barrel. This slower oil income growth can impact reserve replenishment. Still, the Central Bank maintains a careful balance between funding imports and supporting private sector trade.

He urged the Central Bank to monitor Iraq’s current account more closely. Doing so helps maintain safe and steady foreign reserve levels. He stressed that these reserves cover more than 100% of currency in circulation. They also meet over 15 months of import needs—far above the three-month global standard.

Foreign Reserves Support Economic Stability remains the government’s financial compass. The Central Bank continues managing this policy with transparency, aiming to preserve economic balance and long-term prosperity.

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