Iraq News Now

Shafaq News/ Iraq’s foreign currency reserves, now exceeding $100billion, play an essential role in maintaining economic stability, supportingthe local currency, and enhancing the country’s global creditworthiness,officials and economic experts said.

Mazhar Mohammed Saleh, the financial and economic advisor to the Iraqi PrimeMinister, told Shafaq News that foreign reserves are essential for addressingbalance-of-payments challenges and stabilizing the economy. "Countrieswith substantial reserves ensure economic stability and can addressbalance-of-payments issues effectively," Saleh said.

He emphasized the importance of diversifying reserves into foreigncurrencies, gold, and bonds, adding that the US dollar remains the dominantglobal currency. "The dollar is the most accepted and widely used currencyfor international transactions and offers the greatest flexibility," heexplained.

"Countries prefer assets that provide stable annual returns, likegovernment bonds. Gold, by contrast, does not offer fixed returns and is harderto liquidate during crises compared to foreign currencies and bonds," hesaid.

Iraq’s Reserve Composition

According to the Central Bank of Iraq, the country’s reserves consist of$106 billion in foreign currencies and gold, including 152.6 tons of goldvalued at $16 billion. This makes Iraq the 29th-largest holder of gold globallyand the third in the Arab world, following Saudi Arabia and Lebanon.

Economic expert Abdul Rahman Al-Mashhadani, a university professor,explained that Iraq invests portions of its reserves in US Treasury bonds, withholdings ranging between $31 billion and $34 billion, while the remainingreserves remain liquid. "The reserves are the property of the state, notthe government, ensuring long-term economic stability," he said.

“Gold in Iraq’s reserves is used strategically to generate returns bytaking advantage of market fluctuations, Iraq buys gold when prices drop andsells when they rise, earning profits. However, storing gold in global banksincurs storage fees," Al-Mashhadani added.

According to Al-Mashhadani, despite its substantial reserves, Iraq lacksa sovereign wealth fund to reinvest surplus revenues into diverse sectors,unlike countries like Saudi Arabia. "Iraq does not have sovereign funds toinvest surplus reserves, which limits opportunities for diversification."

External Investments

Former Central Bank of Iraq official Mahmoud Dagher said Iraq’s reservesare distributed globally among major financial institutions. "Iraq holdsreserves in institutions like the US Federal Reserve, the European CentralBank, the Bank of England, and the Bank for International Settlements inSwitzerland, as well as in banks in the UAE and Saudi Arabia," Daghersaid.

These reserves are made up of foreign currencies, bonds, and gold."The Central Bank of Iraq manages these assets, generating returns throughinvestments in bonds and other financial instruments. This is what we callexternal investments," Dagher explained.

Currency Stability

Jamal Cougar, a member of the Parliamentary Finance Committee,highlighted the importance of the reserves in stabilizing Iraq’s currency."The large reserves serve as a critical safeguard for the local currency,ensuring its stability. They allow the central bank to intervene in case of anydisruptions in financial policies," he said.

Amid many speculating that the currency would collapse, Cougar dismissedthese concerns saying that “such fears are unfounded”.

Long-Term Growth

Economist Hilal Al-Taan said Iraq has significantly increased itsreserves since 2003. "Iraq’s foreign currency reserves have grown to over$110 billion, with gold holdings exceeding 150 tons. These reserves are atestament to the country’s financial resilience and economic growth," hesaid.

Taan explained that Iraq’s reserves generate consistent returns throughstrategic investments in bonds and currencies. "The continuousreinvestment of these reserves contributes to long-term financial stability andsteady returns," he concluded.