Iraq considers dinar devaluation and currency redesign to stabilize economy

Iraq is considering a major overhaul of its currency and fiscal policies, according to Safaa Al-Jabri, a member of the Parliamentary Economic Committee. The government is reviewing a proposal to adjust the official exchange rate from 1,310 dinars to 1,500 dinars per U.S. dollar. This move aims to align the official rate closer to the parallel market rate, which recently exceeded 160,000 dinars per $100, and to reduce the planned fiscal deficit for the 2027 budget.

In addition to the exchange rate adjustment, high-level discussions are ongoing about redenominating the Iraqi dinar by removing three zeros. This technical measure is currently delayed due to legal reviews to determine the appropriate authority to implement the change. Al-Jabri also projected that Iraq’s sovereign state revenues for the 2027 federal budget will exceed $110 billion, supported by rising non-oil revenues and domestic petroleum sales.

Al-Jabri criticized past budget practices, claiming that state budgets were prepared through outdated methods for nearly twenty years. He highlighted structural financial arrears, including unpaid dues to farmers and contractors, and noted that Prime Minister Ali Faleh Al-Zaidi has canceled underperforming public work contracts. The proposed changes reflect efforts to stabilize Iraq’s economy after disruptions at the Strait of Hormuz and Basra export halts.