By Anas al-Bar | 2026-10-25

The Iraqi government recently devalued the dinar by approximately 16 percent to address a paralyzing national liquidity crisis.

This difficult choice followed the rejection of two harsh alternatives that the government desperately sought to avoid entirely.

Authorities faced either delaying public sector salaries or increasing borrowing against a total public debt of 138 billion dollars.

The official exchange rate has shifted from 1,320 to 1,520 dinars per US dollar to manage these monetary conditions.

The government emphasized this measure responds directly to current economic pressures while securing essential funds for monthly national obligations.

This strategy generates more local currency from oil revenues, enabling the treasury to meet its massive 8 billion dollar commitment.

The move also helps curb the rapid depletion of the Central Bank’s hard currency reserves by reducing foreign demand.

Given Iraq's heavy reliance on crude oil, the policy attempts to protect the state against falling global oil prices.

Because most Iraqi oil exports must transit the Strait of Hormuz, shipments once plummeted 90 percent during the ongoing conflict.

Devaluation triggers economic concerns

Many parliament members and economists strongly opposed this measure, arguing it severely exacerbates burdens on struggling Iraqi citizens.

Individuals with limited or fixed incomes will be the hardest hit, economics professor Abdul Rahman al-Mashhadani told Al-Fassel.

"The decision erodes the real value of incomes and salaries, effectively reducing citizens' purchasing power by over 30 percent," he said.

The policy also drives up inflation rates by raising import costs and causing significant disruption to existing supply contracts.

Instead, al-Mashhadani advocates for broad anti-corruption efforts and stabilizing the dollar exchange rate in the volatile parallel market.

Experts advise drastically cutting state expenditures to relieve pressure on cash reserves and maximizing all non-oil revenues.

Embracing these fiscal adjustments represents a crucial step toward stabilizing the national economy, ultimately ensuring sustainable growth and long-term well-being for the Iraqi population.