Publication Details
Abstract
The policy of profit distribution between central banks and governments is a common practice worldwide. However, its mechanisms and details vary from one country to another. The primary objective is to contribute to increased public revenue, and it is important to understand this practice and its effects on the government budget and monetary policy.
Profit distribution does not literally mean dividing profits, as it is either a direct division of profits between the central bank and the government or the transfer of part (or all) of the profits to the state's public treasury after deducting the necessary reserves and expenses for the central bank. Moreover, the legal frameworks regulating this policy vary from country to country based on laws and regulations, which affects how profits are distributed and their size.
Iraq suffers from a persistent budget deficit, leading to significant domestic debt—more than 75% of the debt is owed to the Central Bank of Iraq. The Iraqi government relies on oil revenues to finance the public budget, causing a major imbalance in the country's economic performance. Conversely, monetary policy has achieved important successes in confronting crises, in addition to accumulating annual profits during the period 2015-2024. Hence, a profit distribution policy could serve as a financial buffer to diversify sources of public revenue and/or finance the budget deficit, increase revenue, attract investments, and consequently, boost productive sectors in the country.