In Baghdad the price of a dollar is a political decision. It is set in the Council of Ministers, and it settles who will carry the cost of a war Iraq did not start. On Tuesday, 6 October, the council set a new one.
As Al Jazeera reported, the cabinet approved new exchange rates for the dinar after an emergency recommendation from Finance Minister Falih al-Sari and the governor of the Central Bank of Iraq. Since Wednesday, banks and exchange firms have sold dollars to the public at 1,520 dinars, up from 1,320. The new rate undoes the previous government’s work to strengthen the currency. Reuters, citing the state news agency, gave the same figure and put the cut at 14.5 per cent.
The decree, Cabinet Resolution No. 544 of 2026, sets up a ladder of rates, according to IraqiNews. The Finance Ministry sells its dollars at 1,500 dinars, the central bank sells to licensed banks at 1,510, and the final buyer pays at most 1,520. The ministry also stopped collecting customs tariffs and tax deposits on imports in advance. Not every report agrees on the old rate: IraqiNews gives it as 1,310, while others give 1,320. So the size of the cut depends on which number you start from.
The strait
The cause lies a long way south of the Tigris, in the Strait of Hormuz. Since the US war on Iran began in late February, shipping through the strait has been disrupted, and most of Iraq’s oil exports go that way. At one point exports fell by 90 per cent. In August Iraq shipped 2.34 million barrels a day, against a pre-war average of 3.6 million. Oil pays for more than 90 per cent of the federal budget. The central bank’s reserves fell from about $106bn before the war to roughly $80bn by late August. Prime Minister Ali al-Zaidi said the country was “facing extraordinary economic challenges” and put lost oil revenue at about $60bn. The war has been washing up on Iraq’s ledgers for months.
Iraq sells its crude in dollars and pays its salaries in dinars. Fewer barrels mean fewer dollars, and fewer dollars mean the state cannot cover its wage bill. A weaker dinar fixes that on paper. Analyst Mohammed al-Saffar told Reuters the move “gives the government more dinars for each dollar of oil revenue”. He also warned that it makes imports more expensive and reduces what households can buy.
Just before the devaluation the government adopted its 2027 budget. It plans spending of 217 trillion dinars, about $166bn, with a deficit of more than 40 trillion dinars, about $30bn. The Gulf business outlet AGBI reported that Baghdad had been considering a rate of 1,400 to 1,500 dinars to the dollar, and had denied it for months. The final rate went beyond that range.
First came the denials. Then came the decree.
A parliament left out
The central bank called the decision a “strategic step”. Dozens of lawmakers said in a joint statement that nobody had told them how or why it was taken, and that the bank should have briefed parliament first. Opposing MPs had Wednesday’s parliamentary agenda cancelled so the chamber could debate the move. The finance minister and the central bank governor were due to appear before parliament on Thursday.
Aziz Nasser al-Shammari, of parliament’s integrity body, said he and his colleagues were “surprised”. Then he said what many others seemed to mean:
Waging war on the poor like this is wrong.
Hassan al-Asadi of the al-Nahj National Alliance rejected the decision. He argued the government had other options, such as cutting unnecessary spending, and warned that the gap between the official and parallel rates could “inflict severe harm on the poor and vulnerable”. Saba al-Saadi blamed the Finance Ministry and the central bank for mismanagement and promised a parliamentary review.
The street rate
Most Iraqis never buy dollars at the official rate. They buy on the parallel market, and that market moved fast. The unofficial rate was already above 1,600 dinars before the announcement and rose past 1,700 after it, according to a report carried by BNN Bloomberg. The same report said many exchange shops in Irbil closed once the change was announced. Nabil Al-Marsoomi, an economist at Basra University, said the devaluation “will allow it to pay salaries, but it will lead to a rise in prices.”
The prices that will rise are for things Iraq does not make for itself: food, medicine and the inputs its factories need. Prices had already been climbing since the war began. Lawmakers listed what ordinary Iraqis were already facing: higher prices, fees and taxes, unemployment, and salaries and welfare payments that arrive late. A government that cannot pay wages on time has given itself more dinars to pay them with. Each of those dinars will now buy less.
Three times in six years
Iraq has been here before. In December 2020, after oil prices crashed, the dinar was devalued from about 1,182 to 1,450 per dollar. A leaked draft budget combined the devaluation with salary cuts, and the public outcry followed. Mohammed al-Daraji of the finance committee warned at the time of steep price rises with no help for poor families. Al-Asadi says private banks and speculators profited from that devaluation, not the state.
In January 2023, as the United States restricted dollar flows, the dinar slid to about 1,670. Prime Minister Mohammed Shia al-Sudani replaced the central bank governor, and his government later set the public rate at 1,320. That was the rate the new government has now abandoned. MPs are asking what it does to a citizen to see the currency strengthened by one cabinet and weakened again by the next.
A reflection, not a finding: a currency is a promise a state makes to people who did not set its terms. In Iraq the promise has been rewritten three times in six years, each time because of oil, wars and dollar flows decided far from Baghdad. On Thursday the minister and the governor were due to explain themselves to parliament. The parallel market had already set its own price: more than 1,700.