Dollar hits 1,680 Iraqi dinars in free exchange market
BAGHDAD,— Iraq’s Council of Ministers has set a new exchange rate for the dinar, fixing it at 1,520 dinars per US dollar, a drop of nearly 14.5% from the earlier official rate.
The move was confirmed in a Council of Ministers decision and a statement from the Finance Ministry.
Economists linked the currency cut to disrupted oil sales, Iraq’s main source of income, caused by the US-Israeli war on Iran.
The decision was passed on Tuesday and took effect Wednesday. Under the new structure, the Finance Ministry will buy dollars at 1,500 dinars each, while banks and non-bank financial firms will sell dollars to end users at 1,510 dinars.
Iraqi analyst Mohammed al-Saffar described the devaluation as a fiscal response to the hit Iraq’s oil income took from the Iran war and halted exports.
He noted it gives the government more dinars per dollar of oil revenue, though it pushes up import costs and cuts household buying power.
In local currency markets, traders in Sulaimani city in Iraq’s Kurdistan Region, told iKurd news the dollar was trading at 1,680 dinars, though trading had nearly stopped as people waited to see how the situation would unfold.
Four members of parliament’s finance committee told Reuters on Tuesday that officials were weighing a further rate adjustment.
The draft budget is built on an assumed oil price of $58 a barrel, with spending set at 217 trillion dinars, close to $166 billion, and a deficit exceeding 40 trillion dinars, the lawmakers said.
The budget also projects crude exports of about 4 million barrels daily, including output from the Kurdistan region. Oil sales make up most of Iraq’s state revenue.
Iraq has been looking for alternative shipping routes since Gulf crude exports were disrupted during the Iran war.
That disruption pushed global oil prices past $100 a barrel and dropped Iraq’s exports to around 2.34 million barrels per day in August, down from over 3.6 million bpd before the conflict began.
(With files from Reuters)
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