At a Glance

• Iraq's foreign reserves remain at relatively safe levels near $79.2 billion.
• Current assets cover roughly 9.6 months of imports, beating the 6-month safety benchmark.
• Reserves act as the main line of defense to stabilize the exchange rate.

Mudher Muhammad Salih, financial advisor to the Iraqi Prime Minister, stated that the nation’s $79.2 billion foreign reserves remain at safe levels, though a recent decline requires cautious oversight to safeguard the dinar’s stability.

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Key Statement and Focus Area

• Salih noted that "the International Monetary Fund (IMF) estimated Iraq's total reserves at approximately $79.2 billion for the year 2026, according to its estimates published in 2025, which is equivalent to about 9.6 months of imports of goods and services."
• He stressed that “foreign reserves play a pivotal role in supporting the stability of the Iraqi dinar exchange rate.”

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Speaking to the state-run Iraqi News Agency, Salih said that while covering over six months of imports maintains a "relatively safe level" under the reserve adequacy index, a recent decline in reserves demands closer monitoring. 

He clarified that current levels are not yet critical, but warned that a prolonged downward trend could erode the nation's future safety margin.

Salih highlighted that foreign reserves stabilize the Iraqi dinar and serve as the "main line of defense" against currency pressure. This protection is sustained "through the Central Bank's ability to provide the dollar and meet the legitimate demand for it, thereby contributing to protecting stability and overall growth."

The advisor warned that heavy reliance on oil exports poses a major risk, as any drop in market prices directly reduces government revenue and foreign inflows, threatening reserve and exchange rate stability.

Salih urged safeguarding Central Bank independence by halting the continuous use of foreign reserves to fund budget deficits, warning that such monetary financing risks depleting assets and fueling "inflationary and monetary pressures."

"The sustainable solution lies in controlling government spending, especially current expenditures, and developing non-oil revenues, alongside using monetary policy tools to manage liquidity and maintain monetary stability," he added.

According to Salih, Iraq’s current monetary situation remains reassuring, but a continuous decline in reserves demands caution as long-term sustainability depends on public finance reforms and reducing oil reliance.

FYI

Salih’s statement comes as Iraq experiences a major fiscal crisis in mid-2026, driven by a sharp decline in oil revenues and a widening budget deficit.

Because oil accounts for over 90% of Iraq's federal revenue, the country remains highly vulnerable to energy market shocks, with lower oil prices and export disruptions slashing H1 2026 oil earnings to just $18.5 billion.

Furthermore, official data published by the Central Bank of Iraq (CBI) on August 24 reveals that foreign reserves declined by 11.6% ($11.25 billion) during the first half of 2026, dropping from $97.43 billion to $86.17 billion.

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