Iraq devalues dinar to ease cash crunch, leaving traders in limbo

What the report says

Iraq’s government has lowered the dinar’s official exchange rate against the US dollar in an effort to relieve a cash squeeze and ensure that public salaries and other essential spending can be paid. According to Al Jazeera, the Central Bank of Iraq set the cash-sale rate at 1,520 dinars per dollar, down from 1,320, a move the report says amounts to nearly a 15 percent devaluation. Prime Minister Ali al-Zaidi said the cabinet faced difficult choices as it tried to cover wages and mandatory expenses amid a revenue shortfall.

The policy has immediately affected wholesalers and importers, especially in Baghdad’s Jameela market, where traders buy goods in dollars but sell in dinars. Al Jazeera reported that merchants are struggling to price stock amid exchange-rate swings, with some pausing buying and selling altogether because the weaker currency raises the local-currency cost of imported goods and creates uncertainty over losses already held in inventory.

The article links the crisis to wider disruptions caused by the war involving Iran and Israel and the impact on Iraqi oil exports through the Strait of Hormuz, which normally account for most of state revenue. It also notes that Iraq has turned to domestic borrowing and that foreign reserves have fallen from earlier levels. Economists quoted by the outlet said a weaker currency may ease immediate pressure, but it does not solve deeper fiscal and structural weaknesses in the economy.