The financial and economic advisor to the Prime Minister, Muthar Muhammad Saleh, revealed today, Wednesday, the impact of the increase in cash issuance in Iraq on economic and financial stability.
Saleh stated in a press talk, which was reviewed by "Video News Agency," that "cash issuance in Iraq recorded a significant increase during the first five months of 2026, reaching about 113.560 trillion dinars by the end of May, an increase of 13.761 trillion dinars, or 13.8% compared to the end of 2025."
He added that "this development occurred in the context of an exceptional financial crisis accompanying the decline in oil exports due to the repercussions of the Hormuz Strait crisis and war, as Iraqi exports fell to about 15% of their usual levels, before gradually improving to about 30% of those levels."
Saleh clarified that "the increase in cash issuance should not be viewed in isolation from the circumstances that brought it about. It was not the result of a monetary expansion aimed at stimulating demand or financing regular expenditures; rather, it came in response to the government's need to provide the necessary liquidity to cover salaries and essential expenses amid the sharp decline in oil revenues."
He pointed out that "the larger part of these needs was financed through the expansion of domestic public debt by issuing treasury bonds, which were subscribed to by government banks before being discounted at the central bank, thus providing the necessary liquidity to finance public expenditure. As a result, the central bank now holds more than 60% of government debt instruments within its investment portfolio."
Saleh continued, saying that "this development, although it reflects an expansion in cash issuance, the assessment of its risks should be based on indicators of monetary stability, not just the size of cash issuance alone. In the literature of monetary policy, the coverage of the money supply by foreign reserves is considered one of the most important indicators of the strength of the monetary center, as international practices indicate that coverage of no less than 75% is an indicator of the effectiveness of foreign reserves in supporting price stability and the exchange rate, and enhancing confidence in the national currency."
The government advisor also noted that "this ratio, according to available data, is still achieved, and the annual inflation rate has remained stable at about 4.5%, which indicates that the increase in cash issuance has not yet translated into widespread inflationary pressures, reflecting the continued ability of monetary policy to absorb the effects of monetary expansion and maintain monetary stability."
He added, "Nonetheless, the continuation of this path for an extended period may entail increasing risks, as repeated reliance on monetizing public debt through the central bank may lead in the future to inflationary pressures or a decline in the level of coverage of foreign reserves if oil revenues do not recover sufficiently."
According to Saleh, the success of monetary policy in the upcoming phase will depend, in coordination with fiscal policy, on its ability to maintain adequate foreign reserves, curb the continuous expansion of cash financing for the deficit, and rebuild the balance between public revenues and government spending as oil conditions improve.
Saleh concluded his remarks by stating that "the current increase in cash issuance does not, in itself, represent an indicator of a serious monetary or financial imbalance; rather, it reflects an exceptional response to a temporary external financial shock. The final judgment on the soundness of this path remains linked to the sustainability of foreign reserves, the continued control over inflation, and the government's success in reducing reliance on cash financing for the deficit as oil revenues recover. Therefore, the main challenge facing monetary policy is not the size of cash issuance itself, but rather maintaining the efficiency of covering the money supply with foreign reserves and sustaining monetary stability in close coordination with fiscal policy."