{Economic: Euphrates News} Financial Advisor to Prime Minister Mohammed Shiaa Al-Sudani revealed features of the financial budget schedules for 2024.
Mazhar Mohammed Saleh told Euphrates News, “The announcement of the variables of the financial schedules for the last year 2024 came undoubtedly identical to the constants adopted by Law No. 13 of 2023, the Federal Public Budget Law (Tripartite), specifically in the axis of the hypothetical deficit of about 64 trillion dinars, and the estimates of the budget tables in the paragraph of the planned deficit have not dis not detray from what was mentioned in the law above.” He added, “Despite the above, there are important trends in the management of the general budget, whether in the aspect of public expenditures, in which the spending ceiling reached 211 trillion dinars, revenues and the deficit itself, and it is summarized as the foloing: 1- Oil prices still exceed their estimates in the tripartite budget of $70 per barrel and a positive change rate of more than 16% above the approved price above. We are approaching the middle of the fiscal year while maintaining the export rates approved in the budget and managing oil production efficiently and in accordance with international agreements with OPEC on the issue of controlling production shares. 2. There is a high discipline in maximizing non-oil revenues, especially tax and customs, specifically after the adoption of autization, modern methods and information technology in estimation, guessing and tax and customs collection. 3. Seeking to impose discipline on operational expenses and to spend on them to the minimum acceptable limits. 4. Ensuring the efficiency of investment spending and the operation of all approved projects, in order to ensure a high growth rate in the GDP and more than the rate of population growth, by launching the movement of new projects without decline or interruption. Saleh pointed out that “the pattern of public spending, according to the schedules announced, is characterized by accuracy, objectivity and self-savings, which contributes to reducing the resort to financing the actual deficit even when needed through internal borrowing and with limits that ultimately do not exceed the accepted international standard percentage of financing the deficit, which is 3% of the country’s gross GDP or slightly exceeds.” He pointed out that “not forgetting that the efficiency of annual exchange in the operational and investment parts is an important issue in determining the total annual year expenditure as planned.”
The report issued by the International Monetary Fund’s mission for the current year 2024 for the Article IV consultations praised the Iraqi government’s measures, including the monetary policy led by the Central Bank of Iraq, and the report indicated that the Central Bank of Iraq has taken several measures aimed at stabilizing the national currency and controlling monetary inflation. He added that the central bank raised the interest rate on monetary policy instruments from 4% to 7.5% and increased the mandatory reserve requirements of banks from 15% to 18%, and these steps were crucial in reducing the inflationary pressures suffered by Iraq, and this contributed to the creation of a more stable economic environment. The report stressed that important reforms in the banking sector such as the gradual increase in bank capital and mergers between small banks aim to strengthen the banking sector, increase its efficiency and flexibility in the face of economic shocks. The report noted that Iraq has implemented new compliance measures to improve the transparency of cross-border financial transactions, through the launch of an electronic platform that enforces the disclosure of financial beneficiaries, which enhances the integrity of financial transfers in line with international banking standards, as well as the role of the Central Bank of Iraq in expanding correspondent banking relations, to facilitate international trade financing operations more smoothly.
The Iraqi banking system may soon receive banks of another type called (digital banks), what are these banks and will the citizen, the banking system and the Iraqi economy benefit from them? Files that the beneficiary of the banking sector in Iraq is trying to ask.
Financial expert Ziad Al-Hashemi says, “Online banks, also known as digital banks or new banks (neo-banks), are banking financial institutions that operate fully and exclusively online, and unlike traditional banks, where digital banks do not usually have actual branches in cities, but rely on providing their services on the website and mobile applications, and the banking services needed by the citizen, the merchant and the institution can be provided through mobile applications.”
He continues, “The most important advantages of digital banks are the ease of opening account, access and balance management, lower fees and cost, and in them have various and distinguished services (such as budget applications, spending plans and flexible integration) and other advantages. Because of these advantages, digital banks have begun to spread in many countries in Europe, the Americas and Asia, and from these banks – Chase bank – Monzo – Revolut – Starling – Tide and other digital banks.”
Al-Hashemi explains that “the issue of success and expansion of such type of bank is linked to the situation of the economic environment and the nature of society, as these banks often rely on cashless electronic operations active in an advanced banking system, and a society that tends to use cards instead of cash in its transactions.”
The financial expert calls on the Central Bank of Iraq to “a little lone in granting digital banks vacations, evaluating all these risks and challenges and looking for new timings to launch this type of bank, and it must be aware of the availability of favorable conditions and the existence of high chances of success, instead of urgency and adventure, this is a ready recipe for failure.”
The establishment of any digital bank, inside Iraq, requires that about 30% of its shares return to a traditional bank, and the dissemination of services through the Internet and mobile applications, and there is no branch, but only the general administration, and all online services from issuing a bank card, financial transfers, deposit, loans and others.
Iraq has more than 70 banks, many of which have been subjected to US sanctions, while the ratio of financial inclusion reaches a low level due to weak confidence between the banking sector and citizens as a result of the bankruptcy of some of them.
The Governor of the Central Bank of Iraq, Ali Mohsen Al-Alaq, had confirmed earlier on the sidelin of a ceremony organized by the bank, that the steps achieved in financial inclusion, which were completed today, are accelerated and can close the gap that occurred during the past years as a result of the conditions that Iraq has gone through.
Al-Alaq stated that the bank has continuous meetings with the Iraqi government to expand the base of customers in electronic payment methods and enhance financial inclusion, “as we see a great response from the various state institutions in the framework of expanding the financial and banking culture in Iraq.”
Al-Alaq said, “The factors that lead to the success and expansion of the role of financial inclusion are the citizen’s confidence in the institutions and tools available to him, as well as the vision of his interest in using them.”
He continued, “The Central Bank has become at the forefront of global central banks using various financial technologies that provide speed and accuracy,” revealing at the same time that “the bank receives large numbers of requests to establish digital banks. The concerned departments are working to grant them the license to practice their work in accordance with the controls and instructions issued by the bank.”
For his part, financial expert Mahmoud Dagher believes in a press interview followed by “Economy News”, that “digital banks are natural banks as are traditional banks, but they work through applications and have no face-to-face treatment.”
And digital banks, according to Dagher, can perform their work as a digital independent bank or even as classic banks, pointing out that the young generation has become knowledge in the use of financial technology for withdrawal, transfer and others.”
Today, Iraq has one digital bank, while many applications are waiting for the green light by the Central Bank of Iraq to give it the license to practice its work in accordance with the controls and instructions issued by it.
According to the Central Bank of Iraq, the licensing requirements for the practice of digital banking activity include that the licenses of digital banks in Iraq do not exceed (10% of the total licensed banks, in addition to the existence of an economic feasibility study that includes business plans, strategies and financial indicators for 4 years, including the technical aspect and services to be launched.
It is noteworthy that these digital banks are subject to all laws, regulations and instructions issued by the Central Bank, including the Anti-Money Laundering and Terrorism Financing Law No. 39 of 2015.
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