Iraq’s liquidity crisis deepens, delaying salary payments and prompting parliamentary action to determine the fate of 28 trillion dinars.
Iraq’s liquidity crisis deepens, delaying salary payments and prompting parliamentary action to determine the fate of 28 trillion dinars.
2026-02-21 00:26
Shafaq News – Baghdad
An informed source revealed on Saturday that the salaries of central finance employees in state ministries and institutions have not been disbursed yet, attributing the reason to a lack of financial liquidity and a shortage of cash at government banks, especially Al-Rafidain and Al-Rasheed banks.
The source explained in a statement to Shafaq News Agency that “the delay in disbursement comes despite the fact that the last days of February have begun,” noting that “the financial procedures have not been completed due to the limited cash available in government banks, which has negatively affected the date of salary release.”
He added that “state employees’ salaries will be delayed for about 20 days this month as a result of the ongoing liquidity crisis,” noting that “the relevant authorities are working to address the crisis and secure the necessary funds to release the salaries as soon as possible.”
The source also indicated “a parliamentary movement to host the Governor of the Central Bank of Iraq and the directors of government banks, specifically Al-Rafidain and Al-Rasheed banks, within the House of Representatives to discuss the repercussions of the worsening financial crisis in the country, the scarcity of cash liquidity, the high exchange rates of the dollar, in addition to the delay in paying the salaries of employees and retirees.”
Meanwhile, members of the Iraqi parliament stressed that the current stage requires a clear disclosure of the facts to the public, especially regarding the withdrawal of more than 28 trillion dinars from government banks, questioning whether those withdrawals were carried out with official approvals, and where did that money go in light of indications of the waste of public funds and suspicions of administrative and financial corruption?
They stated that the performance of government banks remains below the required level due to their continued reliance on traditional paper-based methods and their failure to keep pace with modern electronic banking systems, which has negatively impacted work efficiency, the speed of completing transactions, and the poor services provided to citizens.
The MPs also stressed the need to reassess the work of the directors of government banks according to their performance level, and to review the approved credit policies, questioning the reasons for the absence of a clear credit plan that contributes to enhancing state revenues and supporting the general budget instead of continuing to rely on limited resources in light of the current economic challenges.
In mid-February, informed sources revealed the worsening financial liquidity crisis in the country, confirming that the available resources were no longer sufficient to secure the payment of salaries for employees and retirees in the coming period.
Sources who spoke to Shafaq News Agency at the time reported that the government was forced to withdraw about 20 trillion dinars from Rafidain Bank, in addition to between 7 and 8 trillion dinars from Rasheed Bank, as well as withdrawing about 7 billion dollars from another bank, along with sums of money from industrial and agricultural banks, in order to cover salaries during the past months.
She explained that these measures have led to the depletion of a large portion of the liquidity available in government banks, which makes the option of delaying the payment of employee salaries strongly on the table during the next stage if urgent financial solutions are not found to contain the crisis.
She pointed out that the continuation of these conditions may exacerbate the financial crisis, especially with the existence of observations related to mismanagement, waste of public money and suspicions in some files, which calls for taking urgent reform measures to ensure financial stability and secure the salaries of employees and retirees on their specified dates.
On the other hand, parliamentarians pointed out that “the amount of cash hoarded by citizens in their homes is estimated at about 80 trillion dinars,” considering that “this figure represents a challenge and an opportunity at the same time, and requires the development of effective financial and banking policies by the Central Bank and the administrations of government banks to restore the confidence of citizens and encourage them to deposit their money within the banking system.”
They stressed that “the economic file represents a major challenge for the executive and legislative authorities,” noting that “after the formation of specialized committees, the relevant officials will be hosted, and extensive dialogues will be opened, in addition to following up on parliamentary questions directed to the governor of the Central Bank regarding the financial crisis in order to reach practical solutions that contribute to addressing the current imbalances and enhancing financial stability in the country.”
In a related context, observers raised questions about the contract establishing the new Rafidain Bank, and the lack of transparency in disclosing its details, and whether this paves the way for the privatization of government banks or their investment by the private sector,” stressing the need to clarify the nature of the contract and ensure that state assets are not compromised.
In 2021, the Iraqi Ministry of Finance approved a package of reform measures related to the restructuring of Al-Rafidain Bank, in accordance with the “White Paper” on economic reform in the country.
At the end of 2024, Ernst & Young, a professional services firm, confirmed that the restructuring of Rafidain Bank had reached 74%. Firas Kilani, an expert on the restructuring project from the British company, said that “the bank’s restructuring project has progressed very significantly since it began in September 2024.”
At the beginning of 2025, outgoing Iraqi Prime Minister Mohammed Shia al-Sudani announced that the project to restructure Rafidain Bank had reached its final stages.
Rafidain Bank was established under Law No. (33) of 1941 and commenced its operations on 5/19/1941 with a paid-up capital of (50) fifty thousand dinars. The bank currently has (164) branches inside Iraq in addition to (7) branches abroad, namely: Cairo, Beirut, Abu Dhabi, Bahrain, Sana’a, Amman, Jabal Amman.
At the beginning of 2026, Mazhar Muhammad Salih, the financial advisor to the outgoing Prime Minister, revealed that the new Rafidain Bank would have highly efficient capital, with the possibility of bringing in an international strategic banking partner.
Mazhar told Shafaq News Agency that “the study prepared by one of the major financial companies specializing in banking and financial reform does not go for the option of privatizing Rafidain Bank before starting its structural reform through institutional specialization.”
He explained that “this study proposes redefining Rafidain Bank as the sovereign bank of the government, so that its role is limited to managing government financial operations, primarily managing the unified treasury account, and its operational link with more than a thousand government disbursement and spending units.”
Saleh also pointed out that “this sovereign bank is entrusted with an organic link to the center of finance and policy in the financial authority, in order to ensure the organization of state finances through precise coordination between revenues and expenditures, and linking this to the cash budget (the government’s cash flow budget), with the aim of achieving the highest levels of efficiency in financial management, discipline, governance, and transparency.”
The government financial advisor added that “the study proposes the establishment of another bank called (Al-Rafidain – One), which operates as a mixed public-private joint-stock company, and follows the principles of the modern banking market.”
“This bank is supposed to have highly efficient capital and operate in accordance with Basel (3) regulations, which will enhance the strength of the banking system and deepen the national banking market,” according to Saleh.
He pointed out that “this bank’s business model is based on high compliance levels and low risks, and its main activity is to grant bank credit to natural and legal persons, in accordance with the latest modern banking practices, while employing advanced financial information technology (FinTech) in a way that achieves digital financial inclusion, and contributes to integrating the national banking market and transforming it into a unified and effective force.”
Saleh concluded by saying that “Rafidain Bank – One undertakes the practice of financing foreign trade, with the possibility of bringing in an international strategic banking partner, which will raise its operational and technical capabilities, and gradually elevate it to the ranks of regional banks with high credit ratings, and make it a real lever for modernizing the Iraqi banking sector and supporting sustainable economic development.”
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