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The
country’s central bank said in a statement that the new exchange
rate had been decided at a meeting of Iraq’s Cabinet the night
before “to meet the relevant financial, economic and monetary
requirements.”
The previous exchange rate was set in 2023. In practice, there
has always been a gap between the official rate and the market
rate used by exchange shops.
That gap had widened in recent months as a result of the U.S.
war with Iran — which has sometimes spilled over into Iraq — and
disruptions to shipping in the Strait of Hormuz.
Iraq’s economy relies heavily on oil exports, most of which were
shipped via the strait before the war. Since the war started,
Iraq has resorted to shipping oil overland through Syria for
export, but the route is more expensive and less efficient.
The devaluation of the dinar means that each dollar earned from
oil exports brings in more dinars, helping the Iraqi government
cover domestic spending. But it also makes imports more
expensive, which potentially drives up prices for consumers.
The unofficial rate had risen to more than 1,600 dinars to the
dollar before the official devaluation was announced. After the
announcement of the new official exchange rate, the market rate
jumped to more than 1,700 dinars to the dollar.
At the new official rate, Iraq's Finance Ministry will sell
dollars at 1,500 dinars for $1, while consumers purchasing from
banks will pay 1,520 dinars for a dollar.
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