Shafaq News – Baghdad
Baghdad’s foreign currency reserves are facing mounting pressure from lower oil prices and liquidity-draining monetary policy, the Central Bank of Iraq (CBI) warned on Wednesday.
In an official report, the Bank said Iraq’s reserves remain closely tied to oil revenues, leaving them vulnerable to fluctuations in global crude prices. Monetary sterilization measures used to withdraw liquidity from the market have also weighed on reserves, as they require drawing on foreign assets, it added.
Oil prices fell to about $69 per barrel in the second quarter of 2025 from roughly $81 a year earlier, the report showed, contributing to a decline in foreign reserves to 126.16 trillion dinars ($96.2 billion) from 142.69 trillion dinars ($108.8 billion) over the same period.
Efforts to preserve monetary stability through liquidity withdrawal operations led to higher cash receipts, the CBI said, as it sold more dollars in exchange for dinars. Cash receipts rose to 21.66 trillion dinars ($16.5 billion) from 18.37 trillion dinars ($14 billion), reflecting “increased dollar sales.”
The Bank also flagged budget deficit financing as an additional factor weighing on net foreign reserves.
Earlier CBI data showed that Iraq’s foreign reserves stood at about $98.1 billion by September 2025, down from roughly $100.3 billion a year earlier, extending a gradual decline from peaks recorded in 2023.
Iraq’s economy remains heavily dependent on oil exports, which account for about 90% of government revenue, according to government and parliamentary data. Foreign currency reserves play a central role in supporting the dinar, financing imports, and maintaining financial stability under the country’s managed exchange-rate system.
International lenders, including the International Monetary Fund, have repeatedly cautioned that Iraq’s reliance on oil revenues exposes its external buffers to price volatility, while rising fiscal pressures could place further strain on reserves if left unaddressed.
Read more: Dinar slides: Why Iraq’s oil billions aren’t buying currency stability