Key facts
- Iraq's cabinet approved a new exchange rate of 1,520 dinars per US dollar.
- The new rate represents a devaluation of approximately 14.5% from the previous official rate.
- The Finance Ministry's purchase rate was set at 1,500 dinars per dollar.
- The rate for sales by banks and financial institutions to end beneficiaries was set at 1,510 dinars per dollar.
- Economists view the devaluation as a fiscal response to disruptions in oil sales.
- The draft budget assumes an oil price of $58 a barrel and projects spending of 217 trillion dinars.
Iraq's cabinet approved a new exchange-rate structure for the dinar on Tuesday, setting the official rate at 1,520 dinars per US dollar, a devaluation of approximately 14.5% from the previous rate. The decision, effective Wednesday, also established the Finance Ministry's purchase rate at 1,500 dinars per dollar and the rate for sales by banks and non-bank financial institutions to end beneficiaries at 1,510 dinars per dollar.
Economists and analysts view the devaluation as a fiscal response to disruptions in Iraq's oil revenues, its primary source of income, which have been impacted by regional conflicts. Mohammed al-Saffar, an Iraqi analyst, stated that the move provides the government with more dinars for each dollar of oil revenue but will increase import costs and reduce household purchasing power.
Four members of parliament's finance committee had informed Reuters on Tuesday that the government was considering adjusting the exchange rate. The draft budget, according to these lawmakers, assumes an oil price of $58 a barrel, projects spending of 217 trillion dinars (approximately $166 billion), and forecasts a deficit exceeding 40 trillion dinars. It also anticipates crude oil exports of around 4 million barrels per day. International oil prices have risen above $100 a barrel due to disruptions, reducing Iraqi exports to about 2.34 million barrels per day in August from over 3.6 million bpd prior to the conflict.