Iraq devalues the dinar against the dollar amid pressure on oil revenues
Agencies2 min read
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Iraq has devalued the dinar against the dollar, adopting new exchange rates that raised the selling price of the US currency to the public to 1,520 dinars, at a time when the Iraqi economy is facing increasing pressure due to declining oil exports and disruptions to shipping through the Strait of Hormuz.
The Central Bank of Iraq decided on Wednesday to set the dollar purchase price from the Ministry of Finance at 1,500 dinars, the selling price to banks at 1,510 dinars, and the selling price to the public at 1,520 dinars, while discontinuing the previous rate.
The bank stated that the decision is based on a resolution taken by the Council of Ministers on October 6, which includes adjusting the dinar exchange rates against the dollar "to meet relevant financial, economic, and monetary requirements."
The decision comes as Iraq faces pressure on its oil revenues, with crude exports falling to about 2.34 million barrels per day in August, compared to more than 3.6 million barrels per day before the war, according to Reuters.
The agency quoted economists as saying that devaluing the dinar helps the government obtain a larger amount of local currency in exchange for its dollar oil revenues, but in return, it increases the cost of imports and puts pressure on consumer purchasing power.
Iraq relies heavily on oil revenues to fund public spending, making the decline in exported quantities impactful on revenues even in light of rising global crude prices.
The exchange rate adjustment coincided with a widening gap between the official rate and the market rate, as the Associated Press reported that the dollar exceeded 1,600 dinars in the unofficial market before the decision was announced, and rose to more than 1,700 dinars afterward.
Iraqi oil exports have been under pressure due to unrest in the Strait of Hormuz, which serves as a key corridor for Iraq's oil exports, prompting Baghdad to seek alternative routes for exporting crude and reduce its reliance on the passage.
Despite a partial recovery in oil traffic through the strait, Kpler data cited by Reuters showed that crude flows through Hormuz reached about 14.2 million barrels per day in late September, or nearly 80% of pre-war levels, while transport and insurance costs remain high.
