Shafaq News- Baghdad

Iraq’s money supply has risen by nearly 10% since the start of the year while inflation has remained around 3%, a combination that could signal weaker non-oil activity or increased cash hoarding, economist Manar Al-Obaidi warned on Tuesday.

Under stable money velocity and output growth, a larger money supply would normally put upward pressure on prices. Al-Obaidi argued that the absence of such an increase points to two possible explanations: a marked slowdown in non-oil GDP or weaker circulation of money through the economy.

Read more: Iraq turns to bank borrowing to cover August salaries amid oil-revenue collapse

A non-oil slowdown, he warned, would directly hit private-sector employment. Trade, which is Iraq’s “third-largest contributor to GDP after oil and the government sector,” has also been pressured by the ASYCUDA customs system, higher tariffs and transport and shipping problems.

As an indicator of weaker commercial activity, Al-Obaidi cited a 41% year-on-year decline in Central Bank of Iraq sales, acknowledging that precise data measuring the fall in company activity and demand for jobs remain unavailable.

The second possibility is increased cash hoarding, driven by market concerns over government liquidity and leaving a larger share of issued money outside active circulation.

Al-Obaidi called for urgent stimulus for the commercial and industrial sectors through easier business procedures and tax and customs exemptions, arguing that low inflation should be maintained without constraining private-sector growth and job creation.

Iraq is also facing a liquidity squeeze, with the government moving to borrow more than 3 trillion dinars (about $2.3B) from local private banks to cover August salaries. Government spokesman Haidar Al-Aboudi put monthly state spending needs at about 10.8 trillion dinars (around $8.2B), against oil revenues of roughly 2.5 trillion dinars (nearly $1.9B), while economist Ahmed Eid warned that heavier public borrowing could restrict credit to private businesses and further slow economic activity.

Read more: 2026 budget: Iraq confronts unprecedented fiscal strain