Four months before the Central Bank of Iraq's mandate to eliminate cash payments across all government institutions takes effect, the country's financial sector is navigating a complex convergence of digitization ambitions and international compliance pressures. The CBI's Electronic Payment Services Regulation No. 2 of 2024, which came into full force in 2025, set strict milestones for migrating state transactions to electronic channels, and the progress has been substantial but uneven.
The numbers tell a story of rapid but incomplete transformation. Iraq's financial inclusion rate has climbed from under 10 percent in 2018 to approximately 40 percent today. Active bank accounts have reached around 23 million, and point-of-sale devices now number between 60,000 and 70,000 across the country. The total amount collected through the government's digital payment system reached approximately six trillion Iraqi dinars in 2024, a dramatic increase from 418.3 billion dinars in 2023. By 2024, some 1,395 government departments were using electronic payment collection, up from just 13 departments in 2019.
Sector-specific progress has been visible in Baghdad and major cities. Gas stations across the capital began refusing cash by mid-2025 as part of the fuel sector's transition to digital payments. The interior ministry has completely halted the use of cash for its transactions. The National Company for Electronic Payment Systems, established by the CBI, is developing a national switch to support high transaction volumes with the speed and stability required for a government-wide migration.
Bank readiness presents a more complicated picture. As of March 2026, the CBI has published updated lists of banks prohibited from dealing in US dollars under its banking sector reform initiative. Twenty-two Iraqi banks are currently barred from participating in the foreign currency sales window or conducting dollar transactions, either directly or indirectly. The CBI's Director of Transfers, Ahmed Dawood Salman, confirmed in late March that the bank is working with Oliver Wyman, the international management consultancy, to resolve compliance issues and restore dollar access for affected institutions. The reforms are ongoing, with improvements expected as the review progresses through 2026.
The dollar restrictions create a direct tension with the cashless mandate. Banks barred from dollar transactions lose access to the CBI's daily dollar auction, a critical source of foreign currency for Iraq's import-dependent economy. For these institutions, the simultaneous requirement to invest in digital payment infrastructure while losing a core revenue stream creates significant operational strain. The restrictions reflect pressure from US regulators concerned about currency flows to neighboring Iran, and the Oliver Wyman engagement represents an attempt to satisfy international compliance standards while keeping the domestic banking system functional.
The US-Iraq remittance corridor adds another dimension. Iraq's total remittance market is projected to reach 1.19 billion dollars in 2025, with digital remittances growing at over 10 percent annually. The corridor operates under intense US oversight that complicates real-time cross-border payment integration. Western Union, which is acquiring Intermex for 500 million dollars in a deal expected to close mid-2026, remains a leading player in formal remittance channels to Iraq. Qi Card, Iraq's leading digital payments operator, has identified serving the Iraqi diaspora in the GCC and Europe as a top priority, developing digital remittance channels alongside the traditional wire services that still handle most inbound flows.
Regional cross-border payment infrastructure could eventually provide alternative settlement channels. BUNA, the Arab Monetary Fund's cross-border payment platform, processes transfers in multiple Arab currencies and is expanding its participant base across the region. Iraq's integration into regional payment networks would reduce the reliance on correspondent banking chains that currently add cost and delay to remittance flows, but this depends on the CBI completing its compliance remediation and Iraqi banks regaining access to international payment networks.
The structural challenges are substantial. Rural areas still lack adequate banking access, and deep-seated distrust of formal banking institutions persists across much of the population. Digital banking transactions are projected to grow from 15 billion dollars annually to over 45 billion dollars by 2026, but that projection depends on infrastructure reaching communities where cash remains the only practical option. Overall financial transaction volumes grew from 298 billion dinars in 2019 to approximately 9.8 trillion dinars in 2024, demonstrating that the trajectory is real even if the destination remains uncertain.
Whether the July 2026 deadline proves achievable or aspirational will depend on the pace of the Oliver Wyman compliance remediation, the expansion of banking services beyond major cities, and the development of digital remittance channels that can serve the diaspora while meeting international regulatory standards.