Iraq’s Digital Currency Ambition: A Path to Stability or a Risky Gamble?

Iraq’s push to modernize its financial system through a central bank digital currency (CBDC) has positioned President Abdul Latif Rashid and the Central Bank of Iraq at the forefront of a bold experiment. The initiative, aimed at tackling chronic liquidity shortages and enhancing transparency, could reshape the country’s economic trajectory—or exacerbate its existing vulnerabilities.

The CBDC: A Lifeline or a Leap in the Dark?

The Central Bank’s CBDC proposal seeks to replace cash with a state-controlled digital currency, a move driven by systemic liquidity crises that have paralyzed public services. By reducing reliance on physical currency, the initiative aims to plug leaks in the financial system, curb corruption, and lower operational costs. For context, reveals a devaluation from 1,182 to 1,450 dinars per dollar, underscoring the fragility of trust in the currency.

Prime Minister’s economic advisor Mazhar Mohammed Saleh argues the CBDC could boost financial inclusion, targeting Iraq’s 53% unbanked population. However, shows little progress since 2018, hinting at deeper institutional barriers.

The Hurdles: Infrastructure and Trust

Despite the ambitions, challenges loom large. Only 58% of Iraqis had internet access in 2023 (), and frequent power outages cripple connectivity. Public distrust in banks, fueled by delayed salary payments and past crises, further complicates adoption.

The Central Bank’s prohibition on unregulated cryptocurrencies—such as Bitcoin—adds another layer of control. While this aligns with global trends toward state-backed digital currencies, it risks stifling innovation. Meanwhile, FastIraq’s push to build a regional telecom hub through fiber networks and data centers () offers a glimmer of hope for broader digital transformation.

The Broader Picture: Risks and Rewards

The CBDC’s success hinges on more than technology. Iraq’s liquidity crisis stems not just from cash mismanagement but from unsustainable fiscal policies. Economist Ali al-Furaiji notes that even with a digital currency, unresolved budget deficits—driven by overstaffed public sectors and energy subsidies—will persist.

Yet there are strategic advantages. As a crossroads between Europe and Asia, Iraq’s geographic position could make it a connectivity hub. FastIraq’s projects, if successful, could attract global tech firms seeking low-latency routes for AI and cloud services.

Conclusion: A High-Stakes Gamble with Potential Payoffs

Iraq’s digital infrastructure push is a high-risk, high-reward endeavor. The CBDC could stabilize the economy by curbing cash leakage and modernizing transactions, but its success depends on overcoming technological gaps, rebuilding public trust, and addressing fiscal fundamentals.

The telecom sector offers a clearer near-term investment angle. FastIraq’s efforts to boost connectivity align with global trends, and shows a 45% increase in funding since 2020. However, investors must weigh risks like political instability and cybersecurity threats.

For now, the CBDC remains a symbol of ambition. Without parallel reforms to tackle corruption and fiscal discipline, even the most advanced digital systems may falter. Iraq’s fate hinges on whether its leaders can turn infrastructure into opportunity—and not just another layer of complexity.