Exclusive: Iraqi currency issuance jumps 13.8% in five months under pressure from salaries and expenses

Exclusive: Iraqi currency issuance jumps 13.8% in five months under pressure from salaries and expenses

2026-08-05

Shafaq News – Baghdad
A special survey conducted by Shafaq News Agency showed that the volume of Iraqi currency issuance rose to 113.560 trillion dinars in May 2026, an increase of about 13.761 trillion dinars, or 13.8%, compared to the end of December 2025, amid escalating financial pressures that prompted the government to seek liquidity to ensure the payment of salaries and basic expenses.

According to data monitored by the agency, the issuance of cash rose from 99.799 trillion dinars in December 2025 to 101.431 trillion in January 2026, then to 104.614 trillion in February, and 108.985 trillion in March, before climbing to 112.896 trillion in April and 113.560 trillion in May.

The monthly increase reached its highest level in March, when issuance rose by about 4.371 trillion dinars, followed by an increase of 3.911 trillion in April, while the increase slowed during May to about 664 billion dinars.

This increase comes at a time when public finances are facing a growing gap between revenues and expenditures, coinciding with disruptions in oil revenue flows and delays in releasing salaries for a number of state institutions, which has increased the need to provide Iraqi dinars within the banking system.

Financial and banking expert Mahmoud Dagher, who previously served as Director General at the Central Bank of Iraq, told Shafaq News Agency that “issuing currency in itself is not an exceptional matter, but rather represents one of the normal operations carried out by the Central Bank, but the current conditions necessitate choosing the least painful tools that are capable of alleviating the severity of the crisis.”

He added that “the cash issuance used to fund remittance discounting operations has become the only tool available during this short period, and it is likely to continue to be used during the next month, until other decisions and procedures are taken.”

Dagher explained that “the possibility of this policy contributing to higher inflation or putting pressure on foreign reserves remains, but the country is forced to bear this option as it is the lesser of two evils under the current circumstances, and it should not be exaggerated despite its difficulty.”

He pointed out that “Iraq is facing a real crisis and does not have ideal solutions, nor does it have access to external assistance or funds in a sovereign wealth fund that it can resort to, in addition to the limited alternative oil export outlets, and therefore the available options remain narrow.”

Salaries eat up revenues

Data on the implementation of the federal budget up to the end of May 2026 reveals that public revenues reached 33.747 trillion dinars, compared to expenditures of 45.070 trillion, which means recording an actual gap of approximately 11.323 trillion dinars during the first five months of the year.

Employee compensation accounted for approximately 25.556 trillion dinars, representing nearly 57% of total recorded expenditures, while social welfare spending reached 11.373 trillion dinars. Oil revenues remained the primary source of state funding, constituting 84% of total public revenues.

The government needs more than eight trillion dinars monthly to cover salaries, wages, pensions and social welfare allocations, which means that any decline in oil revenues or delay in converting dollars to dinars will quickly affect funding schedules.

The liquidity crisis has worsened in recent weeks as salary payments have been delayed. The government has stated it is working to secure funds through domestic borrowing and may resort to external borrowing if oil export disruptions persist. Parliamentary statements have attributed the delays to the time required to convert available foreign currency reserves into Iraqi dinars.

An increase in issued currency does not automatically mean that the central bank has printed money without backing to finance salaries, as currency management includes replacing damaged banknotes and meeting seasonal demand for cash, in addition to providing liquidity to banks and discounting treasury bills.

The Central Bank of Iraq stressed that there is a fundamental difference between “discounting treasury bills” and “printing currency,” explaining that discounting provides temporary liquidity in exchange for a government debt instrument that is recovered when due, while printing, in the economic sense, means issuing new money without compensation and injecting it permanently, which may lead to inflation and erosion of the value of the dinar.

The bank stressed that the use of monetary tools in exceptional circumstances must remain disciplined and temporary, and should not become a permanent channel for financing government expenditures, warning against transferring financial imbalances to monetary policy and the purchasing power of citizens.

Experts say the risk is not only related to the increase in the issuance of money, but also to the duration of the increase, the amount of government reserves, assets and revenues that correspond to it, and the extent to which the Ministry of Finance is able to pay treasury bills when they are due.

Experts told Shafaq News Agency that if the recourse to cash liquidity continues without addressing the root of the crisis, which is the inflation of current expenditures and the treasury’s almost complete dependence on oil, the pressures may gradually shift to price levels, the dinar exchange rate, and foreign reserves, which makes issuing cash a temporary bridge to overcome the crisis, not a permanent solution to it.

shafaq.com