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."



Cash Shortage Squeezes Gaza Residents

Palestinian children queue for a hot meal at a charity kitchen in Gaza City on April 30, 2025. (Photo by Omar AL-QATTAA / AFP)
Palestinian children queue for a hot meal at a charity kitchen in Gaza City on April 30, 2025. (Photo by Omar AL-QATTAA / AFP)
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Cash Shortage Squeezes Gaza Residents

Palestinian children queue for a hot meal at a charity kitchen in Gaza City on April 30, 2025. (Photo by Omar AL-QATTAA / AFP)
Palestinian children queue for a hot meal at a charity kitchen in Gaza City on April 30, 2025. (Photo by Omar AL-QATTAA / AFP)

Even when food is available, many in Gaza cannot afford to buy it, as the enclave suffers from a severe cash shortage. Israel has blocked the entry of new currency into the territory since October 7, 2023, leaving residents at the mercy of money changers who have hiked exchange rates on remittances to exorbitant levels.

Palestinians in Gaza primarily rely on the Israeli shekel for daily transactions, which used to enter the strip through banks operating under the Palestinian Monetary Authority, supplied by the Bank of Israel.

Banking operations in Gaza have ground to a halt since the start of the war, and no fresh banknotes have entered the enclave, worsening an already dire humanitarian situation. Residents say they have been left at the mercy of traders who exploit the cash shortage to impose arbitrary rules on currency use.

'The Traders’ Game'

Dubbed “the traders’ game” by many in Gaza, the practice began with merchants refusing to accept worn-out banknotes and certain coins, such as the 10-shekel piece (worth about $3), which have all but vanished from local markets. Some vendors now reject older versions of bills - like the brown-hued 100-shekel note (around $28) - insisting instead on the newer yellow ones. The same rules apply to various denominations.

Speaking to Asharq Al-Awsat, Hani Jahjouh, a resident of al-Shati Camp west of Gaza City, said vendors selling vegetables and essential goods - when available - often refuse worn banknotes or specific coins, claiming they are counterfeit or easily faked.

“This just adds to the burden of people already crushed by impossible living conditions,” said Jahjouh, 59. “We don’t have solutions. We don’t even know where to get the money they’re asking for.”

Only a very small number of traders accept digital payments, and even then, residents say, they impose tough conditions - such as inflated prices or demands for partial payment in cash.

Displaced Gazan Duaa Ismail, originally from Beit Hanoun in the north of the enclave, says even when goods are available, she cannot afford them due to a lack of cash.

“We’re suffering badly from a shortage of money, and that makes it even harder to get basic items like flour and sugar - when they’re even in stock,” she told Asharq Al-Awsat from a shelter in Gaza City’s Sheikh Radwan neighborhood.

Ismail said that during a brief ceasefire, some traders had accepted digital payments through mobile apps. “But once the war resumed, things worsened, and they stopped taking them altogether,” she said.

Salaries They Can’t Spend

The crisis has also hit public-sector employees, private workers, and international aid staff, many of whom receive salaries through bank transfers or mobile wallets but have no way of accessing their funds with banks shuttered. They are forced to rely on currency dealers or traders with access to physical cash.

Amjad Hasballah, an employee with the Palestinian Authority, said he has been cashing his monthly salary through mobile banking apps for over a year and a half, paying a steep commission to money traders in return.

“When I received my last salary in early April, the commission had reached 30%,” he said.

Speaking to Asharq Al-Awsat, Hasballah explained that at the start of the war, commissions hovered around 5%, but they spiked during Ramadan, peaking at 35% around Eid al-Fitr, before dipping slightly to 30%.

“My salary is just 2,800 shekels. When I pay a 30% fee, there’s barely anything left,” he said bitterly. “At this point, the traders might as well take the whole salary and just give us pocket money.”

Caught in a Trap

Jamal Al-Mashal, a father of six who lost two children in an Israeli airstrike, said he lives off 1,000 shekels (about $280) in monthly international aid. But even that amount is slashed by up to 30% when he exchanges it through local traders.

“People in Gaza have become a cash trap for currency dealers and big traders,” he said. “They’re exploiting our desperation, and it’s like a harvest season for them - raking in profits while we suffer.”

The poorest and most vulnerable are hit hardest. Many international agencies rely on electronic payment platforms to distribute aid to these groups, who often have no access to physical currency.

No Oversight, No Restraint

The Hamas-run government has made attempts to cap commission rates at 5%, but those efforts have largely failed. Officials blame ongoing Israeli targeting of personnel involved in regulating the process.

Money changers defend the high fees, arguing that the lack of currency entering Gaza leaves them with limited options.

“We raise commission rates because there’s simply no new cash coming in,” one trader told Asharq Al-Awsat. “Once money is distributed to the public, we have no way of getting it back. What goes out doesn’t return.”

He added that while ministries and law enforcement have tried to impose limits, traders view the rules as unfair. “There have been attempts to regulate us, but we haven’t complied - they’re asking too much from us under impossible conditions,” he said.

Some municipal leaders and community elders in Gaza have recently appealed to the Palestinian Monetary Authority in Ramallah to intervene in what they describe as unchecked profiteering by traders controlling access to scarce cash.

They have called for greater oversight, including monitoring and freezing the traders’ bank accounts.

The authority has repeatedly warned against exploitation of civilians and threatened to take action. But in practice, traders continue to charge hefty commissions on money transfers with little deterrence.

The Authority has urged residents to use its Instant Payment System available through mobile banking apps, which it says offers a practical alternative to cash, promotes digital payments, and enables real-time transactions.

Cash Squeeze Tightens Further

Despite the hardship, Israel is considering new measures that could further tighten the financial stranglehold on Gaza. One proposal involves withdrawing the 200-shekel banknote (worth about $55) from circulation, on the grounds that Hamas allegedly uses it to pay salaries to its fighters.

The suggestion was reportedly made by Israeli Foreign Minister Gideon Sa’ar to Bank of Israel Governor Amir Yaron, who rejected the move. Other proposals include voiding the serial numbers of banknotes believed to be inside Gaza, effectively rendering them worthless, a step that could deliver a significant financial blow to Hamas.

According to a report published Tuesday by the Israeli daily Maariv, the proposal has backing from several ministers and economists both within and outside the central bank.

The report estimated that around 10 billion shekels in high-denomination bills - 100 and 200 shekels - remain in circulation within Gaza. These notes entered the enclave over the years through official banking channels supplied by the Bank of Israel.

Economists told Maariv that Gaza residents receive an estimated 150 to 200 million shekels each month through digital transfers from aid organizations and the Palestinian Authority. That money is then converted into cash within markets dominated by Hamas and supported by a network of money changers.

Israeli security sources estimate that Hamas has accumulated up to five billion shekels since the war began and has spent nearly one billion shekels on salaries for fighters and new recruits. The sources claim Hamas has profited significantly by reselling aid and fuel at inflated prices during the conflict.