The Central Bank of Iraq published an International Monetary Fund (IMF) mission statement following meetings in May 2025, highlighting IMF praise for progress in absorbing excess liquidity and moving foreign trade financing to a new correspondent-banking model instead of reliance on the daily USD auction. The IMF linked the trade finance shift to improved compliance with international transparency requirements, including Office of Foreign Assets Control (OFAC) rules, and noted a narrowing of the gap between the official USD rate and the parallel market rate. Supporting measures cited included increased issuance of short-term debt instruments (Central Bank transfers and Islamic certificates of deposit), changes to banks’ subscription limits in Central Bank auctions, and improved cash liquidity forecasting tools and practices. On foreign exchange management, the update pointed to complementary steps such as obliging traders to submit real import invoices and simplifying procedures for legitimate importers to access hard currency. The mission also welcomed progress on digital technology and initial banking sector reform steps, including asset quality audits and non-performing loan estimates for government banks and a draft plan to financially and administratively restructure Al-Rafidain and Al-Rasheed, alongside digitization initiatives in electronic payments and internet and mobile banking. The IMF called for swift completion of comprehensive banking sector reforms and recommended further actions including reducing dollarization, strengthening banks’ institutional governance, upgrading digital infrastructure and cybersecurity, expanding the role of private banks in financing economic activity, continuing to improve anti-money laundering and counter-terrorist financing procedures, and sustaining increased issuance of short-term Central Bank securities to improve excess-liquidity management.

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