Mudhahir Mohammed Salih, adviser to Iraqi Prime Minister to Mohammed Al-Sudani, clarified details of what he described as "bridge borrowing" on March 6, confirming that internal debt has reached IQD82 trillion ($56.1bn).

The announcement of the growing internal debt may dampen expectations on Iraq’s economy as it continues to grow following a cessation of violence and deals with Switzerland and Britain.

Salih said in a statement that bridge borrowing, which "was used for limited periods not exceeding weeks or financial quarters," aims to "bridge the temporary deficit gap resulting from slowing revenues compared to actual expenses," Ultra Iraq reported on March 6.

He added: "Due to monthly financial obligations, public finances may resort to issuing treasury transfers as a financing tool to cover the temporary budget deficit until cash flow stabilises in the coming period of the fiscal year."

Salih pointed to "the accumulation of internal public debt, part of which was borne by government banks, where more than half was discounted at the Central Bank of Iraq through open market operations."

This "necessitated a complementary monetary issuance that led to a noticeable increase in the money supply, especially since the internal public debt, amounting to IQD82 trillion, is still largely within the government financial and banking system, with more than 50% concentrated in the Central Bank's investment portfolio."

He said: "Despite these challenges, both monetary and fiscal authorities are seeking continuous consultation to gradually extinguish internal debt," explaining that "the government is relying on enhancing financial sustainability by reducing the public debt balance annually and lowering the annual budget deficit to no more than 3% of GDP."