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What’s Next as Iraq Moves to End Deadlock?

Abdul Latif Rashid takes his oath of office in front of Iraqi lawmakers in Baghdad, Iraq, October 13, 2022. (Iraqi Parliament Media Office/Handout via Reuters)
Abdul Latif Rashid takes his oath of office in front of Iraqi lawmakers in Baghdad, Iraq, October 13, 2022. (Iraqi Parliament Media Office/Handout via Reuters)
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What’s Next as Iraq Moves to End Deadlock?

Abdul Latif Rashid takes his oath of office in front of Iraqi lawmakers in Baghdad, Iraq, October 13, 2022. (Iraqi Parliament Media Office/Handout via Reuters)
Abdul Latif Rashid takes his oath of office in front of Iraqi lawmakers in Baghdad, Iraq, October 13, 2022. (Iraqi Parliament Media Office/Handout via Reuters)

Iraqi lawmakers have elected a new president who swiftly named a prime minister in the hope of ending a year of political gridlock and deadly violence.

But major challenges lie ahead for the crisis-hit nation.

How will government talks play out?

Iraq's parliament, dominated by the pro-Iran Coordination Framework of Shiite factions, elected on Thursday a new president, 78-year-old Kurdish former minister Abdul Latif Rashid.

The new head of state moved immediately to task Shiite politician Mohammad Shia al-Sudani with forming a government, capping a whole year of deadlock between major parties since Iraq last went to the polls in October 2021.

In multi-ethnic, multi-confessional Iraq, where political alliances and coalitions constantly shift, divisions between feuding factions might resurface and complicate Sudani's efforts in the 30 days afforded to him to form a government capable of commanding a majority in parliament.

In the past, constitutional deadlines have been routinely missed amid protracted political wrangling.

"Once we start discussing who becomes minister, but even more critically who gains more leverage over the senior civil service, government agencies, state coffers -- that's when we will continue to see the fragmentation and stalemate play out," said Renad Mansour of British think-tank Chatham House.

He explained that Iraq is headed for "another power-sharing government", where political parties will "try and divide the country's wealth".

And the stakes are high. A colossal $87 billion in revenues from oil exports are locked up in the central bank's coffers.

The money can help rebuild infrastructure in the war-ravaged country, but it can only be invested after lawmakers approve a state budget presented by the government, once formed.

What will Sadr do?

The future government's hands may be tied by influential Shiite cleric Moqtada Sadr, capable of mobilizing tens of thousands of his supporters with a single tweet.

In June, he had ordered the 73 lawmakers in his bloc to resign, leaving parliament in the hands of the rival Coordination Framework, which now controls 138 out of 329 seats in the legislature.

This pro-Iranian alliance includes the political arm of the former paramilitary Popular Mobilization Forces (PMF), as well as Sadr's longtime rival, former prime minister Nouri al-Maliki.

Political analyst Ali al-Baidar noted the Sadrist movement has kept uncharacteristically "quiet".

It may be that their leader has been "giving the political forces a chance", but it could also be the result of "an agreement offering the movement some" government positions in return for their tacit approval of Sudani's nomination, Baidar said.

Tensions between the two rival Shiite camps boiled over on August 29 when more than 30 Sadr supporters were killed in clashes with Iran-backed factions and the army in Baghdad's Green Zone, which houses government buildings and diplomatic missions.

"It remains a precarious state of affairs," Mansour said.

"Sadr will remain on the margins of the political scene, trying to disrupt and use protests to replace the political capital" he lost in parliament, the researcher added.

Sadr is "hoping to force an early election using controlled instability as he always has, to maintain his power and leverage in negotiations.

"But mistakes in the past few months have... put him in a difficult bargaining position," Mansour continued.

Is there hope for change?

Political analyst Baidar said the "consensus" on Rashid's appointment means a government will be formed relatively easily, but stressed the "colossal tasks" ahead.

Nearly four out of 10 young Iraqis are unemployed and one-third of the oil-rich country's population of 42 million lives in poverty, according to the United Nations.

Prime minister-designate Sudani vowed on Thursday to push through "economic reforms" that would revitalize Iraq's industry, agriculture and private sector.

He also promised to provide young Iraqis "employment opportunities and housing".

According to Baidar, a "growing" global interest in Iraqi politics -- specifically from Washington, Paris and London -- could "force politicians to perform better".

"While Iraq is by no means a poor country, private and partisan interests conspire to divert resources away from critical investment in national development," UN envoy Jeanine Hennis-Plasschaert told the Security Council last week.

"Iraq's political and governance system ignores the needs of the Iraqi people," she charged.

"Pervasive corruption is a major root cause of Iraqi dysfunctionality. And frankly, no leader can claim to be shielded from it."

A pessimistic Mansour said "public life will remain as it is".

"People will still not have their basic rights, water, healthcare, electricity."

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To Get Their Own Cash, People in Gaza Must Pay Middlemen a 40% Cut

A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
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To Get Their Own Cash, People in Gaza Must Pay Middlemen a 40% Cut

A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)

Cash is the lifeblood of the Gaza Strip’s shattered economy, and like all other necessities in this war-torn territory — food, fuel, medicine — it is in extremely short supply.

With nearly every bank branch and ATM inoperable, people have become reliant on an unrestrained network of powerful cash brokers to get money for daily expenses and commissions on those transactions have soared to about 40%.

"The people are crying blood because of this," said Ayman al-Dahdouh, a school director living in Gaza City. "It’s suffocating us, starving us."

At a time of surging inflation, high unemployment and dwindling savings, the scarcity of cash has magnified the financial squeeze on families — some of whom have begun to sell their possessions to buy essential goods.

The cash that is available has even lost some of its luster. Palestinians use the Israeli currency, the shekel, for most transactions. Yet with Israel no longer resupplying the territory with newly printed bank notes, merchants are increasingly reluctant to accept frayed bills.

Gaza’s punishing cash crunch has several root causes, experts say.

To curtail Hamas’ ability to purchase weapons and pay its fighters, Israel stopped allowing cash to enter Gaza at the start of the war. Around the same time, many wealthy families in Gaza withdrew their money from banks and then fled the territory. And rising fears about Gaza’s financial system prompted foreign businesses selling goods into the territory to demand cash payments.

As Gaza’s money supply dwindled and civilians’ desperation mounted, cash brokers' commissions — around 5% at the start of the war — skyrocketed.

Someone needing cash transfers money electronically to a broker and moments later is handed a fraction of that amount in bills. Many brokers openly advertise their services, while others are more secretive. Some grocers and retailers have also begun exchanging cash for their customers.

"If I need $60, I need to transfer $100," said Mohammed Basheer al-Farra, who lives in southern Gaza after being displaced from Khan Younis. "This is the only way we can buy essentials, like flour and sugar. We lose nearly half of our money just to be able to spend it."

In 2024, inflation in Gaza surged by 230%, according to the World Bank. It dropped slightly during the ceasefire that began in January, only to shoot up again after Israel backed out of the truce in March.

Cash touches every aspect of life in Gaza

About 80% of people in Gaza were unemployed at the end of 2024, according to the World Bank, and the figure is likely higher now. Those with jobs are mostly paid by direct deposits into their bank accounts.

But "when you want to buy vegetables, food, water, medication -- if you want to take transportation, or you need a blanket, or anything — you must use cash," al-Dahdouh said.

Shahid Ajjour’s family has been living off of savings for two years after the pharmacy and another business they owned were ruined by the war.

"We had to sell everything just to get cash," said Ajjour, who sold her gold to buy flour and canned beans. The family of eight spends the equivalent of $12 every two days on flour; before the war, that cost less than $4.

Sugar is very expensive, costing the equivalent of $80-$100 per kilogram (2.2 pounds), multiple people said; before the war, that cost less than $2.

Gasoline is about $25 a liter, or roughly $95 a gallon, when paying the lower, cash price.

Bills are worn and unusable

The bills in Gaza are tattered after 21 months of war.

Money is so fragile, it feels as if it is going to melt in your hands, said Mohammed al-Awini, who lives in a tent camp in southern Gaza.

Small business owners said they were under pressure to ask customers for undamaged cash because their suppliers demand pristine bills from them.

Thaeir Suhwayl, a flour merchant in Deir al-Balah, said his suppliers recently demanded he pay them only with brand new 200-shekel ($60) bank notes, which he said are rare. Most civilians pay him with 20-shekel ($6) notes that are often in poor condition.

On a recent visit to the market, Ajjour transferred the shekel equivalent of around $100 to a cash broker and received around $50 in return. But when she tried to buy some household supplies from a merchant, she was turned away because the bills weren’t in good condition.

"So the worth of your $50 is zero in the end," she said.

This problem has given rise to a new business in Gaza: money repair. It costs between 3 and 10 shekels ($1-$3) to mend old bank notes. But even cash repaired with tape or other means is sometimes rejected.

People are at the mercy of cash brokers

After most of the banks closed in the early days of the war, those with large reserves of cash suddenly had immense power.

"People are at their mercy," said Mahmoud Aqel, who has been displaced from his home in southern Gaza. "No one can stop them."

The war makes it impossible to regulate market prices and exchange rates, said Dalia Alazzeh, an expert in finance and accounting at the University of the West of Scotland. "Nobody can physically monitor what’s happening," Alazzeh said.

A year ago, the Palestine Monetary Authority, the equivalent of a central bank for Gaza and the West Bank, sought to ease the crisis by introducing a digital payment system known as Iburaq. It attracted half a million users, or a quarter of the population, according to the World Bank, but was ultimately undermined by merchants insisting on cash.

Israel sought to ramp up financial pressure on Hamas earlier this year by tightening the distribution of humanitarian aid, which it said was routinely siphoned off by militants and then resold.

Experts said it is unclear if the cash brokers’ activities benefit Hamas, as some Israeli analysts claim.

The war has made it more difficult to determine who is behind all sorts of economic activity in the territory, said Omar Shabaan, director of Palthink for Strategic Studies, a Gaza-based think tank.

"It's a dark place now. You don't know who is bringing cigarettes into Gaza," he said, giving just one example. "It's like a mafia."

These same deep-pocketed traders are likely the ones running cash brokerages, and selling basic foodstuffs, he said. "They benefit by imposing these commissions," he said.

Once families run out of cash, they are forced to turn to humanitarian aid.

Al-Farra said that is what prompted him to begin seeking food at an aid distribution center, where it is common for Palestinians to jostle over one other for sacks of flour and boxes of pasta.

"This is the only way I can feed my family," he said.