Iraq's Central Bank Governor comes under question.

The Central Bank of Iraq CBI is facing mounting scrutiny amid the persistent depreciation of the Iraqi dinar against the U.S. dollar, as efforts to stabilise the currency continue to fall short.

Despite daily auctions, the gap between the official exchange rate and the parallel market rate remains significant, fuelling doubts over the CBI's ability to manage the currency effectively.

On 10th November, members of the Iraqi Parliamentary Finance Committee moved to question CBI Governor Ali Al-Alaq on his handling of the currency crisis. Mohammed Nouri, a committee member, pointed to Al-Alaq’s lack of control over the dollar’s market value and the outsized influence of foreign-owned private banks in currency sales as central issues.

Nouri also cited Al-Alaq’s inability to counteract the power of these foreign banks, which dominate currency sales in Iraq’s “currency window,” as a failure of the CBI's regulatory measures.

The committee's investigation will focus on a range of topics, including currency transfers, cash financing, U.S. sanctions, and interactions with the U.S. Federal Reserve. In response, the committee has formally requested that the Speaker of the House schedule a hearing to address these concerns.

In early 2023, US imposed restrictions on Iraq’s dollar transactions sparked a sharp depreciation in the dinar's value exposing the CBI’s limited capacity to withstand external financial pressures.

Although the CBI has tried to take steps to improve transparency in dollar auctions and implement banking reforms, their ideas often seem financially illiterate and persistent issues such as money laundering, corruption and currency smuggling weaken Iraq’s monetary policy.

Similar currency crises in other nations have shown the vulnerabilities in economies highly dependent on foreign currency flows and lacking robust financial controls. For Iraq, the widening gap between the official and parallel exchange rates has exacerbated economic challenges, threatening social stability as citizens struggle with rising prices and a declining dinar.

Looking ahead, the CBI faces growing pressure to enact reforms that would enhance Iraq's economic resilience against external shocks. Without decisive action, Iraq risks prolonged financial instability, further complicating its economic recovery and increasing public dissatisfaction. We anticipate to see the back of Al-Alaq soon and a revised plan to stabilise the dollar, especially as the Iraqi government braces for Trump and his love of tariffs.