Introduction Financial dollarization refers to the widespread use of foreign currencies, particularly the US dollar, for saving, pricing, or transactions alongside or instead of the domestic currency. It is common in economies experiencing exchange-rate volatility or limited confidence in the national currency. In Iraq, dollarization can influence household and business decisions, financing costs, and private investment choices. Channels Through Which Dollarization Affects Private Investment Dollarization affects private investment through several channels. A preference for holding and using dollars may reduce demand for domestic-currency assets and weaken the transmission of monetary policy to spending and investment decisions. Exchange-rate changes can also raise the cost of imported equipment and materials, making projects more expensive to establish or expand. Firms earning revenue in dinars while owing debts in dollars face currency-mismatch risks, which may weaken repayment capacity and make banks more cautious about lending. However, foreign currency can also serve as a hedge in uncertain environments; therefore, the overall impact depends on the causes and extent of dollarization and the nature of economic activity. Policy Responses Reducing the adverse effects of dollarization requires strengthening confidence in the domestic currency through stable monetary and fiscal policies, better exchange-rate management, and more attractive dinar-denominated saving and investment instruments. Expanding long-term financing for productive projects, improving the business environment, and strengthening transparency are also important. Banks and firms should manage currency risks carefully and avoid excessive foreign-currency borrowing when their revenues are earned in local currency. Conclusion Financial dollarization can influence the scale and composition of private investment through exchange rates, financing costs, currency risks, and the effectiveness of monetary policy. In Iraq, strengthening confidence in the dinar and developing bank financing for productive activities are important steps toward reducing these risks and creating a more supportive environment for sustainable private investme