Iraq devalues dinar to 1,500 per US dollar as oil revenue falls; MPs push back

Mixed · 2Iraq's Council of Ministers approved a new official exchange rate of 1,500 Iraqi dinars per US dollar, on a recommendation from the Central Bank of Iraq, according to a directive seen by The National. 1 2 Mixed · 2Under the directive, the central bank buys from the Ministry of Finance at 1,500 dinars, sells to banks at 1,510 and to the public at 1,520; Al Jazeera put the public rate 200 dinars above the previous price. 1 2 Left · 1Al Jazeera said the cabinet acted on an emergency recommendation from Finance Minister Falih al-Sari and the central bank governor. 2

Mixed · 2Both outlets tie the decision to the Iran war and disruption of the Strait of Hormuz, through which most Iraqi oil exports pass; oil provides more than 90 per cent of the budget. 1 2 Left · 1Al Jazeera reported that exports at one point fell by 90 percent, stood at 2.34 million barrels a day in August against a pre-war 3.6 million, that Prime Minister Ali al-Zaidi said about $60bn in oil revenue had been lost, and that central bank reserves fell from about $106bn to roughly $80bn by late August. 2 Centre · 1The National reported that salaries have been delayed in several provinces, payments to wheat farmers and construction firms deferred, and short-term borrowing from state banks used, and that the finance ministry warned parliament it could not fund the budget without an adjustment. 1

Mixed · 2The change gives the government about 13 per cent more dinars per dollar of oil sold, but makes imports such as food and medicine more expensive; analyst Mohammed al-Saffar told Reuters it raises import costs and reduces households' purchasing power. 1 2 Left · 1Dozens of MPs issued a joint statement saying they had not been told how or why the decision was made; MP Aziz Nasser al-Shammari said "Waging war on the poor like this is wrong", and Hassan al-Asadi of the al-Nahj National Alliance urged cutting unnecessary spending instead. 2 Left · 1Opposing MPs had Wednesday's parliamentary agenda cancelled to debate the move, and the finance minister and central bank governor were due to appear before parliament on Thursday; the central bank called the decision a "strategic step". 2

Left · 1Al Jazeera reported that the parallel-market dollar rate rose after the new official rate took effect, widening the gap, and that most Iraqis cannot get dollars at the official rate. 2 Mixed · 2It is Iraq's second major devaluation in six years: in December 2020 the rate went from 1,182 to 1,450 per dollar, and The National says inflation then jumped and triggered protests in southern provinces. A later rate of 1,320 was set under the previous government, which Al Jazeera says is now being undone. 1 2