Iraq's Economic Update — April 2022

Iraq’s economy is gradually recovering from the twin shocks of the pandemic and collapse in oil prices in 2020. Both oil and non-oil growth are on track to reach their pre-pandemic levels as oil production increases and the easing of COVID-19 restrictions restores domestic economic activity.

Fiscal and external deficits are back to surpluses as oil prices continue to surge. Growth in the medium term is projected to be driven by the oil sector as OPEC+ production cuts are phased out. The outlook remains subject to significant risks including uncertainties relating to the impact of geopolitical tensions, the ongoing pandemic, security challenges, and climate change.

Recent Developments

Iraq’s economy is gradually rebounding following the deep economic strains of the COVID-19 pandemic. Real GDP is estimated to have edged up by 1.3% in 2021, after a sharp contraction of 11.3% in 2020. The rebound was mainly driven by the non-oil sector which grew by 6% in 9 months of 2021-2021 year-on-year (y/y), underpinned by a strong performance of the high contact sectors including transport, accommodation, and retail sectors.

However, agriculture and construction contracted by 17.5% and 36.8% respectively, following severe droughts, energy outages, and the rising global price of inputs. In 9M-2021, oil GDP contracted by 4%(y/y) as Iraq adjusted its oil production as per the OPEC+ agreement. Headline and core inflation edged up to an average of 6% and 6.6%(y/y) in 2021, respectively, following the 23% devaluation in December of 2020 and the gradual recovery in domestic demand.


The turnaround in oil markets has significantly improved Iraq’s economic outlook in the medium term. Overall growth in 2022 is now forecast at 8.9% as OPEC+ quotas end and Iraq’s production surpasses its pre-pandemic level of 4.6 mbpd. Growth in the outer years is projected to remain modest at 3.7% on average as oil production moderates.

Non-oil GDP growth is projected to converge to its long-term potential growth trend in part aided by higher investments that would be financed through the oil windfall. However, growth is forecast to remain constrained by the economy’s limited absorptive capacity and other inefficiencies.

Click here to download the full report.

(Source: World Bank)

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UNITAD, Iraq and Germany Renew Commitment to Investigating the Financial Dimensions of ISIL International Crimes in Iraq

The United Nations Investigative Team to promote accountability for crimes committed by Daesh/ISIL (UNITAD) joined by the Embassy of Iraq to Germany and the German Federal Foreign Office co-hosted a special event on Investigating Financial Dimensions of War Crimes, Crimes against Humanity, and Genocide today in Berlin, Germany.

“With thanks to the generous financial support from Germany, UNITAD established a dedicated Economic Crimes Unit (ECU) to support the work of the Team in relation to the financial aspects of crimes falling within UNITAD’s mandate”, explained Special Adviser and Head of UNITAD Christian Ritscher. “This enabled UNITAD to investigate the complex financial structures that were central to ISIL/Da’esh as an organization which maintained a huge bureaucracy, and used massive resources to commit heinous international crimes.”

H.E. Mr. Lukman Faily, Ambassador of Iraq to Germany, stressed in his opening remarks that “the importance of the continuity of UNTAD’s work inside Iraq and on the international arenas such as Germany, as it reflects the Iraqi and global will to hold ISIL/Da’esh accountable, reveal its sources of funding, its support, and its effects, and also to eliminate ISIL/Da’esh as a transnational terrorist entity.”

In his address, Minister of State of the German Federal Foreign Office, Dr. Tobias Lindner, emphasized the importance of UNITAD’s work to hold ISIL/Da’esh members accountable for their crimes: “accountability is the key to successful reconciliation in post-conflict-societies. Impunity – on the other hand – destroys the social fabric of a society. This is the reason why we encourage partners to adopt the concept of universal jurisdiction and to make ample use of it.”

The Special Adviser further commended Iraq’s commitment to support the mission of UNITAD, and the facilitation of the Team’s investigations towards the common goal of ensuring accountability for ISIL/Da’esh international crimes. At his end, Judge Raed Hameed, Deputy Head of the Ninewa Federal Appeals Court and one of the main Iraqi Investigative judges working on ISIL/Da’esh crimes provided an overview on his investigative work and the ongoing cooperation with UNITAD in this regard.

UNITAD has been able to complete initial lines of inquiry across ISIL/Da’esh’s various revenue streams, with a focus on ISIL/Da’esh’s central treasury (Bayt Al Mal). This progress was built on engagement with Iraqi national authorities which included close collaboration with the Iraqi judiciary, as well as with regulatory bodies such as the Iraq Anti-Money Laundry and Counter-Terrorism Financing Office.

During the special event, UNITAD provided an update on investigations into ISIL/Da’esh’s oil trade and the trafficking in Antiquities, inextricably linked together through ISIL’s own design under the Diwan Al Rekaz (Ministry of Buried Resources), and exploring ISIL/Da’esh’s exploitive taxation schemes, focused on collecting wealth, property, and personal possessions from a range of targeted minority groups.

Discussions also were prompted by valuable insights presented by Ms. Nina Jørgensen, Professor of Public International Law-University of Southampton on the international legal framework presently available to holding financial actors accountable for their role in the commission of international crimes. Those present reaffirmed, in their discussions, the importance of further enhancing international cooperation to track and hold accountable the individuals who facilitated and financially benefited from ISIL/Da’esh crimes in Iraq.

(Source: UN)

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By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Market Review: “The Opportunity in Retail Banking”

The market, as measured by the Rabee Securities RSISX USD Index, was up 6.9% for the month, and up 16.2% for the year.

The index’s increase this month extends the prior month’s gain in which it reclaimed the upper-end of the uptrend channel that it established over the last two years (chart below). Technically, the index’s medium-term pattern looks like a reverse head and shoulder’s bottoming formation, with the recent gains indicating a breakout to the upside. Supporting this formation’s interpretation are the overall average monthly trading volumes over the two-year up-trend which are meaningfully higher than those that prevailed during the prior downtrend.

While technical patterns are of limited value in nascent frontier markets like Iraq, nevertheless the market’s positive action for the second month in a row since the Ukraine war started is a positive development in sharp contrast to that of many markets worldwide – underscoring its attractive risk-reward profile and diversification benefits versus these markets.

(Source: Iraq Stock Exchange, Rabee Securities, AFC Research, data as of March 31st)

Among the index’s constituents, the best performing constituent was the Bank of Baghdad (BBOB) up 19.8%, followed by Baghdad Soft Drinks (IBSD) up 6.9%, Commercial Bank of Iraq (BCOI) up 3.3%, and Asiacell (TASC) up 2.6%, while Gulf Commercial Bank (BGUC) was flat for the month. On the other hand, Al-Mansour Pharmaceutical Industries (IMAP) was down 0.4%, National Chemical and Plastics Industries (INCP) was down 2.1%, the National Bank of Iraq (BNOI) was down 2.5%, and Kharkh Tour Amusement City (SKTA) was down 5.1%.

The Opportunity in Retail Banking

The banking sector’s role in the Iraq investment thesis was reviewed here in February arguing that it is based on “the opportunity for the group to grow earnings multiple folds as the country moves towards a full adoption of banking, and away from the dominance of cash, as both a store of value and a means of economic exchange – cash accounted for about 85% of all transactions in 2020. The key element in the economy’s adoption of banking is the growth in bank lending leading to an expansion in the money circulating in the economy (i.e., broad money), and consequently to an expansion in non-oil GDP. Over time, banks’ earnings grow substantially, which should lead to meaningful increases in their valuations.

Moreover, the update touched upon the opposing growth strategies pursued by the Bank of Baghdad (BBOB) and the National Bank of Iraq (BNOI) – two of the top banks in the country and among the top five constituents of the Rabee Securities RSISX USD Index.

Unlike most banks in the country, the National Bank of Iraq (BNOI)’s strategy was based on growing its retail operation as part of its overall offering of a full spectrum of banking services. The catalyst for this strategy was the government’s “Tawteen” project, launched in 2016, to use the banking system to pay the salaries and pensions of its public sector employees and pensioners instead of making these payments in cash as was done in the past. This involved, among other measures, digitizing the whole processes of making these payments – a project undertaken by a home-grown company, International Smart Card (ISC), through the use of a biometric card dubbed “Qi Card.”

The State-Owned Banks (SOBs) – benefiting from their monopoly position with the public sector, as holders of its deposits and extenders of its loans – provided basic banking services to most of the users of these cards. However, SOBs, for the most part, offer poor banking services, apart from the basics of providing the means for cash withdrawal of these funds as well as the issuance of loans to the public sector and its employees.

Thus, a massive opportunity exists for private sector banks, with the inclination and ability, to compete with SOBs by offering enhanced banking services to the millions of public sector employees and pensioners. A sense of the size and potential of the Tawteen opportunity can be appreciated by considering that as of 2021, public sector employees numbered around 3.2 million, whose annual salary payments totalled about IQD 42 trillion (USD 29 billion) – these numbers don’t include the 600,000 or so employees of State-Owned Enterprises (SOEs) who participate in the Tawteen initiative. Moreover, these sums are likely to grow over the near term, as governments flush with the enhanced bounty of high oil prices, are likely to pursue expansionary budgets as discussed here most recently in the outlook for 2022.

The National Bank of Iraq (BNOI) systematically pursued this opportunity through the development of Tawteen dedicated teams and centres that vigorously courted the public sector and its employees, offering value-added services such as electronic banking, mobile banking, linkages with mobile money wallets provided by the two largest telecom operators, and high-quality customer services. The process developed over the years and accelerated in 2021 as it reached a critical mass of public awareness, so that by the end of 2021, BNOI counted over 100,000 Tawteen customers, with over 15% from the private sector, spanning over 200 public and private sector employers.

This endeavour translated into significant growth in overall customer (retail, SMEs, and corporates) deposits and loan books (chart below). Moreover, by the end of 2021, retail (mostly Tawteen customers) deposits accounted for 35% of total deposits and 59% of total loans. Organic growth accounted for a large part of deposit/loan growth in 2021, but it was enhanced by contributions from the acquisition of the Iraqi branch network of Lebanon’s Bank Audi – discussed here in “Of Assassinations and Corporate Activities

(Source: Company reports, Rabee Securities, AFC Research, data as of end of 2021)

Crucially, this impressive growth in customer deposit and loan generation did not come at the expense of profitability or loan quality. Company data as of the end of 2021 show that the aggregate cost of funds, or interest expense percentage, was 1.6%; while the aggregate return on funds lent, or interest income percentage, was 9.4% for a net spread of 7.8%. However, the actual spread on a normalized basis is probably significantly higher. This is because: (1) The interest paid/charged is made throughout the year as deposits and loans are generated; (2) The 173% year-over-year growth in customer deposits and loans means that cumulative interest paid/charged by year-end does not reflect the size of deposits/loans for the full year.

Moreover, company data as of year-end 2021 show that aggregate non-performing loans (NPLs) were 4.1% of total loans – however, this is the gross NPL ratio which includes the interest income due from these NPLs, and so the net NPL ratio was 2.7%. Crucially gross retail NPLs were around a quarter of the gross aggregate rate – underscoring the attractiveness of the retail segment of the market, mostly shunned and under-served by most banks in the country.

National Bank of Iraq’s tireless CEO Ayman Abu Dhaim

(Source: AFC Research, during a meeting with BNOI’s management team on March 30th)

However, this growth presents several challenges, among which the main one is the need to attract long-term deposits in an economy dominated by cash as both a store of value and a means of economic exchange – cash accounted for about 85% of all transactions in 2020. Consequently, most private sector (retail, SMEs, and Corporates) deposits are in the form of current accounts and demand deposits – the average was 74% of aggregate deposits at all private sector banks by the end of 2020. BNOI’s year-end 2021 current accounts and demand deposits accounted for 64% of the total, with retail current accounts and demand deposits accounting for 41% of total retail deposits. BNOI’s figures in comparison to the national average reflect positively on BNOI’s services. Yet BNOI’s future growth, as it pursues the Tawteen opportunity, will be capped by the amounts of long-term customer deposits held with it- especially as the aggregate loan to deposit ratio (LTD) was 76% by the end of 2021.

To meet its growth objectives, BNOI’s management, over the last two years, embarked on a number of initiatives to attract such long-term, primary retail, deposits. The latest of which were unveiled at the end of the month are: (1) A campaign to attract fixed short-term retail deposits for one, two, and three years offering attractive rates of 9.9%, 10.5%, and 11.0% respectively; (2) the planned issuance of IQD 75 billion (USD 53 million) in three-year IQD corporate bonds, probably a first for any company in Iraq, with rates likely to be similar to those offered for fixed-term deposits.

These rates compare favourably to the recent sovereign offering of IQD 1 trillion (USD 690 million) in two-year and four-year IQD Bina bonds at rates of 6% and 7% respectively. The Bina bonds were aimed at the retail sector but were for a large part subscribed to by the banks for their own books – implying that sovereign rates of 6-7% on two-four year bonds had a limited appeal for the retail segment. As such, the rates recently offered by BNOI should be attractive enough to generate retail interest. Management, in recent discussions, revealed that the first few days of the campaign for attracting fixed-term deposits generated about IQD 20 billion (USD 14 million) in deposits – which could grow meaningfully over the campaign’s duration.

This review is not a detailed company analysis discussing all aspects of the bank, instead it is meant to highlight the opportunity in retail banking in Iraq as pursued by the National Bank of Iraq (please note disclosure * below); is not meant to be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold shares in BNOI. Full details on the National Bank of Iraq, are available on the Iraq Stock Exchange (ISX)’s web site, and research reports are available from Rabee Securities.

BNOI’s advertising of its interactive online banking

(Source: BNOI’s Facebook page)

(*) Disclosure

The AFC Iraq Fund built its position in the National Bank of Iraq (BNOI) throughout the years from its initial investment at the fund’s launch in mid-2015. Ahmed Tabaqchali, in 2020, joined the board of Capital Investments, a wholly-owned company by Capital Bank of Jordan, a majority owner of the National Bank of Iraq with a 61.9% holding as of the end of 2021.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council. He is also a board member of Capital Investments, the investment banking arm of Capital Bank in Jordan.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

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By John Lee.

Royal Jordanian Airlines and the National Bank of Iraq (NBI) have sealed an agreement to introduce the first co-branded credit card in Iraq under RJ’s frequent flyer program “Royal Club“.

This co-branded credit card allows its holders the opportunity to earn additional miles on each payment when using the bank’s credit card, whilst exchanging these miles against many rewards that the program offers ranging from flight tickets, upgrade on their travel booking class, extra baggage allowance and many other benefits.

Royal Jordanian’s Chief Commercial Officer Karim Makhlouf said:

“We are delighted to cooperate with NBI and introduce the first co-branded credit card in Iraq.”

(Source: RJ)

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The IBBC Iraq conference at the Mansion House – meeting at a most important time for Iraq – Tuesday 24 May 

After a two-year absence, IBBC is back at the Mansion House hosting its Iraq conference on Tuesday May 24th focusing on finance, energy and sustaining economic growth in Iraq.

The country stands at another pivotal moment with a new government still in formation, record high oil and gas prices and a world supply crisis, in recovery mode after the pandemic and a strong desire to diversify the economy, grow the private sector and improve employment prospects, particularly for the young, a possible Iranian / US nuclear settlement, issues over water supply and food production, diversifying into renewable energy  and still much work to be done on repairing and renewing infrastructure, but progress being made on improving governance and hugely enhanced government revenue to provide business opportunities across all the sectors.

International interest in investing in Iraq remains strong with the Chinese (Rumaila) and French (Total) Governments being particularly aggressive and most recently a wish expressed by the Saudi Government to join them.

In each sector we are hosting influential Iraqi ministerial attendees including the Minister of Oil H.E. Ihsan Abdul Jabbar Ismaael and Mr Kareem Hatta Deputy Oil Minister for Upstream Affairs, the Governor of the Central Bank of Iraq, H.E Mr. Mustafa Ghalib Mukheef, the Minister of Youth and Sport H.E. Adnan Darjal Motar Al-Rubaye, as well as Ms Taif Al-Shakarchi, Deputy Minister of Finance , Dr Salem Chalabi, President & Chairman of the Trade Bank of Iraq, a delegation of Iraqi Private banks.

From the UK side Louis Taylor, Chief Executive of UKEF, UK Ambassador Mark Bryson- Richardson, BP President Iraq Zaid Elyaseri, and Richard Wilkins from JP Morgan will address the audience with latest developments and opportunities and Professor Frank Gunter will present his latest views on the political economy.

Principal panel subjects include developing the banking sector, project finance, energy transition and how to boost short term production, education and skills, insurance, in addition to an online Tech panel addressing the benefits of crypto currency.

For companies interested in Iraq, this is a prime opportunity to hear what some of the most important players, both government and private sector are saying and thinking, and an excellent place for networking with potential partners and customers from both national and international organisations.

For further information and to register – please follow the link below:

IBBC Spring Conference at the Mansion House, London – IBBC (

A reminder to overseas attendees, to arrange for visas to UK within the next few days as is relevant for your country.

(Source: Iraq Britain Business Council)

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