Why has Iraq devalued its currency, and why are some MPs against it?

What the report says

Iraq has devalued its currency again, with the cabinet approving a new exchange rate for the dinar and banks and exchange companies selling dollars to the public at 1,520 dinars each, up from the previous rate. Al Jazeera reported that the move followed an emergency recommendation from Finance Minister Falih al-Sari and the governor of the Central Bank of Iraq, and it came just after parliament approved the 2027 budget.

The government says the weaker dinar is meant to help manage a widening fiscal gap. According to the article, Iraq plans to spend 217 trillion dinars next year and faces a deficit of more than 40 trillion dinars. The country’s finances have been strained by disruption to oil exports linked to the war involving Iran and wider instability around the Strait of Hormuz, through which much of Iraq’s oil moves. Because oil revenues fund most of the federal budget, the loss of export income has also reduced foreign currency reserves.

Many MPs have objected, arguing that the change will push up living costs and hurt low-income households. Opposition lawmakers said they were not properly briefed before the decision and urged the government to explore spending cuts instead. The article notes that a weaker dinar makes imports more expensive in a country that relies heavily on imported food, medicine and industrial inputs, and that most Iraqis already buy dollars on the parallel market rather than at the official rate.

The report places this move in a broader pattern. Iraq previously devalued the dinar in 2020, and later strengthened it in 2023 after a slide in the currency. Al Jazeera said the finance minister and central bank governor were due to appear before parliament to explain the change.