The Central Bank of Iraq (CBI) issued a comprehensive policy defense clarifying the technical parameters of its liquidity management operations and firmly denying media allegations that the regulator has engaged in unbacked currency printing to fund the government's public deficit.

In an official statement released by its Media Office, the apex bank warned that misrepresenting routine open-market procedures risks undermining public confidence in the Iraqi Dinar (IQD) and creating artificial inflationary panics.

Treasury Discounting vs. Currency Printing

The regulatory response drew an explicit technical line between standard central banking operations and illicit monetary expansion, outlining why recent public commentaries conflated the two:

• Treasury Bill Discounting (خصم حوالات الخزينة): The CBI defined this as a globally standard, temporary liquidity facility backed directly by existing short-term government debt instruments. The capital injected into the banking system is fully contractually recovered once the treasury instruments reach their designated maturity dates.
• Currency Printing (طبع العملة): Conversely, the regulator defined printing as the direct injection of unbacked physical currency into circulation without corresponding assets. The CBI warned that such moves permanently expand the monetary base, trigger systemic inflation, erode purchasing power, and create a permanent economic liability.

The monetary authority underscored that unbacked currency printing is explicitly illegal under domestic statutes, citing a strict statutory prohibition embedded within Central Bank of Iraq Law No. 56 of 2004.

"The simplified characterization of current operations as 'currency printing' is fundamentally inaccurate and fails to reflect their true technical and financial reality," the statement read.

Preserving Institutional Independence

The CBI reasserted its core statutory mandate, emphasizing that its primary responsibility is managing national monetary policy, safeguarding price stability, and ensuring the soundness of the banking sector. The regulator explicitly rejected the notion that it should function as an unrestricted or permanent credit facility for public expenditures.

While the bank acknowledged that it occasionally deploys short-term monetary instruments during exceptional fiscal cycles, it stated these measures are strictly calibrated. The policy aims to prevent immediate fiscal deficits from morphing into structural monetary expansion that directly impacts the purchasing power of Iraqi citizens.

Core Objective	Mechanism Implemented	Regulatory Stance
Liquidity Injections	Short-Term Treasury Bill Discounting	Disbursed via strict maturity deadlines, recovered in full.
Deficit Funding	Public Expenditure Financing	Not a permanent channel; restricted to exceptional circumstances.
Currency Value Protection	Daily Open-Market Operations	Aligned with long-term stabilization targets for the Iraqi Dinar.

Calls for Structural Fiscal Reform

Looking beyond immediate market interventions, the central bank took the opportunity to address long-standing macroeconomic vulnerabilities in Iraq's oil-dependent framework. The regulator urged the state to implement durable, long-term fiscal policies to insulate the domestic economy from cyclical commodity volatility.

The CBI advised that long-term stabilization requires building robust financial buffers and fiscal safety margins through two primary avenues: the comprehensive diversification of state revenue streams away from crude exports, and the implementation of highly efficient public debt management structures.

The central bank concluded by cautioning media institutions against sensationalizing routine, daily currency and asset management practices. It affirmed its strategy to defend the exchange rate and maintain financial stability remains fully intact, calling for precise and accurate journalistic reporting on the local currency.