Middle East Central Banks 2025: Navigating Policy & Stability

The year 2025 presents a dynamic landscape for central banks across the Middle East, as they continue to navigate a complex interplay of global economic shifts, regional geopolitical factors, and ambitious domestic reform agendas. This report card evaluates the performance and strategic initiatives of key central bankers in the region, highlighting their efforts in maintaining monetary stability, fostering economic diversification, and modernizing financial sectors.

From managing currency pegs to embracing fintech innovations, these institutions are pivotal in shaping the economic trajectory of their respective nations. While some economies demonstrate remarkable resilience and robust growth, others contend with deep-seated structural challenges and the imperative for comprehensive reform. The following detailed assessments offer insights into the varied approaches and outcomes observed across Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

BAHRAIN | Khalid Humaidan: B

As the smallest economy within the Gulf Cooperation Council (GCC), Bahrain has consistently demonstrated impressive stability. Economic projections indicate a steady GDP growth rate of 3.5% for the current year, complemented by an inflation rate expected to remain below 1%. The Bahraini dinar's long-standing peg to the US dollar dictates that the Central Bank of Bahrain’s (CBB) monetary policy largely mirrors that of the Federal Reserve. Following the Fed's September rate adjustments, the CBB promptly reduced its overnight deposit rate by 25 basis points, settling at 4.75%.

While this currency peg remains a foundational instrument for stability, the World Bank has cautioned that "Bahrain could face tighter financial conditions from trade-related inflationary pressures and disrupted global supply chains." Historically, Bahrain was a vanguard among Middle Eastern nations in diversifying its economy away from an over-reliance on oil revenues. Its financial sector, a cornerstone of the non-oil economy, hosts some of the region's most established and sizable banks in Manama. Governor Humaidan, with his background as a former head of Global Markets for the Middle East and Africa at BNP Paribas and CEO of Bahrain's Economic Development Board, actively encourages financial institutions to adopt new technologies to enhance market presence and service offerings. A significant development in July saw the CBB become the first Gulf regulator to implement a regulatory framework for stablecoins, underscoring its commitment to financial innovation.

Humaidan's leadership also extends to fostering regional cooperation, working closely with GCC counterparts to streamline cross-border transactions and integrate payment systems. Domestically, authorities are steadfast in advancing their reform agenda, which includes reducing subsidies, incentivizing private-sector investment, and broadening public revenue streams. Notably, this year Bahrain introduced a 15% corporate tax targeting multinationals with consolidated annual revenues exceeding €750 million in two of the preceding four fiscal years. Despite these progressive steps, the kingdom faces considerable headwinds. Public debt is projected to escalate to 144% of GDP by 2028, a notable increase from 130% last year, with debt servicing consuming approximately 30% of government revenue. Furthermore, Bahrain continues to rely significantly on financial assistance packages from regional allies such as Saudi Arabia, Qatar, and the UAE.

IRAQ | Ali Mohsen Al-Alaq: B-

After experiencing two consecutive years of economic recession, Iraq's GDP growth is anticipated to rebound in 2025, primarily propelled by a resurgence in oil production. The Iraqi economy remains profoundly dependent on its hydrocarbon sector, which constitutes approximately 95% of government revenues, rendering it vulnerable to the volatility of global oil prices. Despite long-standing discussions about economic diversification, tangible progress in this area has been limited.

In response, the Central Bank of Iraq (CBI), under Governor Al-Alaq, is championing a strategy termed "developmental central banking." This approach focuses on directing credit towards crucial strategic sectors, particularly agriculture and industry, with the aim of broadening the nation’s economic base. Al-Alaq has explicitly prioritized price stability; inflation notably declined to 3.8% in 2024 from a peak of 7.5% the previous year. With the consumer price index showing a downward trend, the CBI proactively cut its policy rate from 7.5% to 5.5%, seeking to stimulate credit growth and underpin the economic recovery. Another key priority involves the modernization of Iraq’s underdeveloped banking system. Reforms are currently underway within state-owned banks, alongside initiatives designed to curb the prevalence of cash transactions. May 2024 saw the introduction of new regulations for digital banks and electronic payment companies, encouraging the entry of several new market participants. However, the central bank continues to grapple with severe compliance challenges despite persistent efforts to combat money laundering and terrorism financing. A number of Iraqi banks remain barred from dollar transactions due to concerns over illicit financial flows to sanctioned entities. Early 2025 brought to light a new illicit scheme involving prepaid Visa and Mastercard products allegedly used to channel funds to Iran-backed militias. In swift response, the CBI imposed a monthly cap of $300 million on cross-border transfers and limited individual cardholder transactions to $5,000.

JORDAN | Adel Al-Sharkas: B+

Strategically situated amidst regional complexities, bordering Israel and Syria, Jordan has nevertheless exhibited commendable macroeconomic resilience in recent months. The country registered a robust 2.5% GDP growth in 2024, with a similar positive outlook projected for 2025. Governor Adel Al-Sharkas's primary focus remains on upholding price stability and safeguarding the purchasing power of the Jordanian dinar. Given its peg to the US dollar, the Central Bank of Jordan’s (CBJ) monetary policy closely tracks the Federal Reserve’s decisions. A recent rate cut in September brought the main policy rate to 6.25%. Inflation saw a significant decline to 1.6% last year, down from 2.1% in 2023, and is anticipated to hover around 2% in 2025. Jordan's banking sector stands as a testament to its stability, characterized by its robustness, strong capitalization, and inherent resilience against external shocks. In 2024, deposits expanded by 6.1%, and credit growth reached 4.4%, indicative of healthy market dynamics.

In July, the International Monetary Fund (IMF) affirmed that "Jordan’s banking sector remains healthy, with the central bank strengthening systemic risk analysis, financial oversight, and crisis management." Concurrently, comprehensive fiscal and economic reforms are being implemented to enhance the overall business environment. Last year, the CBJ launched its National Financial Inclusion Strategy for 2028, a forward-looking initiative designed to cultivate sustainable growth, foster robust public-private collaboration, and modernize the banking sector. However, a significant challenge persists: the country's substantial reliance on external financial support. With public debt exceeding 90% of GDP, effective management of fiscal sustainability is poised to be a critical concern for Jordan’s future economic stability.

KUWAIT | Basel Al-Haroon: B

In contrast to many other Gulf nations that are actively diversifying beyond oil dependency, hydrocarbon sales continue to constitute approximately 90% of Kuwait’s national revenues. Consequently, the country’s economic performance remains intimately linked to global oil production volumes and price fluctuations. Following a contraction of 2.6% in 2024, GDP is expected to achieve a modest growth of 1.9% in 2025.

Since assuming his role in 2022, Governor Basel Al-Haroon has meticulously pursued a strategy of gradual monetary policy tightening. This involved a cumulative increase of 275 basis points in the main policy rate, reaching 4.25% by July 2023. A modest reduction followed in September 2024, adjusting the effective rate to 3.75%. The Central Bank of Kuwait (CBK) characterizes its monetary approach as "gradual and balanced," meticulously designed to manage inflationary pressures without unduly hindering economic growth. Unlike other GCC central banks, Kuwait's currency is not pegged to the US dollar but rather to an undisclosed basket of international currencies. This framework is endorsed by the IMF as an "appropriate nominal anchor." The Washington-based fund further noted that Kuwait's policy rate is "currently in line with controlling inflation and stabilizing non-oil output while supporting the exchange rate peg." The financial sector remains the bedrock of Kuwait’s non-oil economy and continues to exhibit robust health.

Kuwaiti banks are notable for maintaining healthy capital and liquidity buffers, coupled with exceptionally low levels of non-performing loans. This strong position is largely attributable to prudent lending practices and robust provisioning strategies. In June 2025, the CBK unveiled a draft framework for open banking regulation, a forward-thinking initiative aimed at fostering greater collaboration between fintech innovators and traditional banks. This move seeks to address the rapidly evolving financial needs of Kuwait's young and technologically adept population, further enhancing digital banking services.

LEBANON | Karim Souaid: Too Early To Say

After enduring six years of an unparalleled financial, monetary, and economic crisis, which saw the national currency depreciate by 99% and inflation soar into triple digits, Lebanon may finally be on the cusp of recovery. While the conflict between Israel and Hezbollah has caused widespread devastation, a prolonged political stalemate was resolved in early 2025. A newly formed ruling coalition has begun enacting crucial reforms, potentially unlocking much-needed support from the International Monetary Fund.

Karim Souaid’s appointment as Governor of the Banque du Liban (BDL) in March 2025 places him at the helm during a critical juncture. While it is premature for Global Finance to assess his track record, he unquestionably faces the monumental task of completely restructuring the banking sector and painstakingly rebuilding trust in an institution that has lost considerable credibility both domestically and internationally. His predecessor, Riad Salameh, who led the BDL for nearly three decades, is currently awaiting trial in Beirut on serious charges including embezzlement, money laundering, and tax evasion. Crucial initial steps towards reform have already been undertaken: in April, Parliament successfully lifted banking secrecy, and in July, a comprehensive bank resolution law was passed, paving the way for the necessary restructuring of the financial sector. Consolidation among lenders is anticipated, and some institutions may face closure. The next critical legislative milestone is a gap-resolution law, which will determine how the banking sector’s estimated $80 billion in losses will be covered. On his first day in office, Governor Souaid pledged that "Work must be done to gradually return all bank deposits, starting with small savers as a priority." All attention is now fixed on him and the new administration as they embark on this challenging path to economic recovery.

OMAN | Ahmed Al-Musalmi: Too Early To Say

Oman's economic development trajectory has historically been characterized by a more measured approach compared to its more flamboyant Gulf neighbors. Nevertheless, the Sultanate is currently undergoing an ambitious and comprehensive transformation. Economic growth is projected to accelerate to 3% in 2025, an increase from 1.7% in 2024, driven by a combination of augmented oil revenues and robust performance within the non-oil economy. In a strategic move to attract foreign investment and stimulate domestic demand, particularly in real estate and other key sectors, Oman became the final GCC country to introduce a Golden Visa program in August.

Concurrently, Oman’s banking sector has more than doubled in size over the past decade. While this expansion signifies increased opportunities for innovation in financial services, it also introduces greater regulatory complexity. Governor Ahmed Al-Musalmi was appointed to lead the Central Bank of Oman (CBO) last December. Prior to this pivotal role, he served as CEO of the National Bank of Oman and subsequently as CEO of Bank Sohar. In 2023, he notably oversaw the successful merger of Bank Sohar and HSBC Bank Oman, a strategic consolidation that resulted in the creation of Sohar International, which now stands as the second-largest lender in the country. With further bank mergers and acquisitions (M&A) anticipated in Muscat’s dynamic financial landscape, Al-Musalmi’s specialized expertise in this area is likely to be swiftly put to the test. However, it remains too early for Global Finance to provide a comprehensive evaluation of his performance in his current capacity.

QATAR | Bandar bin Mohammed bin Saoud Al-Thani: B

Already recognized as one of the wealthiest nations globally in terms of GDP per capita, Qatar is poised for continued economic expansion. Projections indicate a 2.4% growth rate this year, accelerating significantly to over 6% in 2026, coinciding with the expected doubling of liquefied natural gas production from the North Field Expansion. Concurrently, inflation remains exceptionally well-contained at approximately 1%, with strong domestic purchasing power bolstering consumer demand. The Qatari riyal's enduring peg to the US dollar ensures that the Qatar Central Bank (QCB)’s monetary policy closely aligns with that of the United States. Doha strategically cut its key rates in September, proactively anticipating the Fed’s movements. The deposit rate now stands at 4.35%, the lending rate at 4.85%, and the repo rate at 4.6%. Governor Bandar bin Mohammed bin Saoud Al-Thani, who also chairs the Qatar Investment Authority (the country’s substantial $450 billion sovereign wealth fund), supervises a comprehensive financial ecosystem comprising eleven local banks and several international lenders, all integral to supporting Qatar's overarching economic transformation.

A recent assessment by S&P noted that "Qatari banks are profitable and benefit from strong capitalization and adequate liquidity," although it identified external debt and potential capital outflows as areas requiring continued vigilance. As major infrastructure projects near completion, the need for external funding is gradually easing. Looking ahead, Qatar has set an ambitious target to attract $100 billion in foreign direct investment (FDI) by 2030. To facilitate this, a new package of pro-business legislation was enacted in January, addressing critical areas such as bankruptcy, public-private partnerships, and commercial registry reform. The QCB is also actively positioning Qatar as a leading destination for financial innovation, evidenced by initiatives such as the Qatar Fintech Hub, developed in partnership with the Qatar Development Bank and the Qatar Financial Centre.

SAUDI ARABIA | Ayman Al-Sayari: B+

As the largest economy in the Middle East, Saudi Arabia has demonstrated remarkable resilience, remaining relatively insulated from the profound regional shockwaves emanating from the conflict in Gaza, geopolitical tensions with Iran, and even broader disruptions to global trade routes. For the current year, economic growth is projected at a robust 3.5%, while inflation is expected to remain comfortably low at 2%. In common with many of its GCC counterparts, Saudi Arabia maintains a currency peg to the US dollar, a policy that the IMF, in its latest Article IV review, continues to deem "appropriate."

In alignment with the Federal Reserve’s decisions, Governor Ayman Al-Sayari implemented a 25 basis point reduction in the main policy rates in September, lowering the repo rate to 4.75% and the reverse repo rate to 4.25%. These easing borrowing costs are strategically intended to stimulate investment across various economic sectors. Saudi banks achieved record profits in 2024, with an impressive average return on assets of 2.2%. Non-performing loans (NPLs) also reached their lowest level since 2016, underscoring the sector's health. However, a robust double-digit credit growth, significantly driven by corporate lending and mortgages, is outpacing deposit growth, creating some discernible funding pressure. To bridge this gap, banks have increasingly resorted to external borrowing, consequently pushing Net Foreign Assets (NFA) into negative territory for the first time since 1993. Despite these emerging pressures, Riyadh maintains one of the lowest public debt levels globally, a position underpinned by high oil revenues, substantial foreign reserves, and a judicious conservative fiscal policy. The IMF has commended that "SAMA’s continued efforts to enhance regulatory and supervisory frameworks are commendable." The kingdom remains an attractive destination for international banks seeking to establish a foothold in the region and align with global best practices. A new Banking Law is anticipated to be enacted in the near future.

UNITED ARAB EMIRATES | Khaled Mohamed Balama: B+

The United Arab Emirates (UAE) consistently delivers a solid economic performance, with GDP growth anticipated at 4.4% this year and inflation effectively contained at 2%. The dirham’s peg to the US dollar ensures that the Central Bank of the UAE (CBUAE) essentially mirrors US monetary policy. Following three rate cuts in 2024, the CBUAE further lowered its overnight deposit facility rate to 4.15% in mid-September.

Concentrated primarily in Dubai and Abu Dhabi, the UAE’s banking sector is a formidable regional powerhouse. In 2024, banking assets witnessed a substantial increase of 12%, reaching an impressive $1.24 trillion, accompanied by record-breaking profits. The return on average equity soared to 19.1%, according to Fitch ratings, while the loan-to-deposit ratio remained stable at 76%, indicative of robust liquidity and strong credit capacity. Emirati banks continue their strategic expansion both domestically and internationally, with a particular focus on growth markets in Asia and Africa. A notable development in March saw Emirates NBD, Dubai’s largest bank, secure regulatory approval to acquire a stake in Banque du Caire, Egypt’s sixth-largest lender. Governor Khaled Mohamed Balama, a veteran with the CBUAE since 2008, oversees a rapidly growing and increasingly diversified financial ecosystem. This includes not only traditional banks but also hundreds of dynamic fintech enterprises and non-bank financial institutions.

For over a decade, the UAE has been a leading regional force in digital finance, consistently pioneering new sectors such as blockchain technology, cryptocurrencies, and artificial intelligence (AI). In July, CBUAE announced a joint venture with Presight, an AI company, specifically aimed at enhancing financial services across the country. Governor Balama is also a strong advocate for green finance, ensuring that financial innovation is strategically aligned with the long-term sustainability goals articulated by the nation’s leadership.