DINAR REVALUATION REPORT: "Strong Economy, Strong Dinar" in Iraq: Insights from Economist Al-Badrani, 30 AUGUST

"Strong Economy, Strong Dinar" in Iraq: Insights from Economist Al-Badrani

As of August 30, 2024, discussions surrounding the Iraqi economy and the potential strength of the dinar continue to be influenced by various factors. 1  3  5An article titled "Strong Economy, Strong Dinar" by economist Al-Badrani offers insights into the relationship between economic stability and currency strength in Iraq.

Economic Stability and Currency Strength

Al-Badrani emphasizes the critical link between a strong economy and a strong national currency. Iraq, as a country heavily reliant on oil revenues, faces challenges in diversifying its economy and ensuring fiscal sustainability. 6 The economist argues that a diversified economy, reduced oil dependence, and fiscal adjustments are crucial for long-term economic health and the strength of the dinar.

Recent Economic Reforms

In June 2023, Iraq's parliament approved a record-breaking three-year budget totaling 198.9 trillion Iraqi dinars (approximately US$153 billion), marking the largest in the country's history and the first multiyear budget. 2 This move is viewed as a step toward addressing unemployment, poverty, and improving government services, which are key to enhancing the economy's resilience and the dinar's strength.

Challenges and Opportunities

Despite these reforms, Iraq faces significant challenges, including pervasive corruption, inadequate public services, and political instability. 1 These issues have hindered economic progress and contributed to public discontent. However, there are positive strides in human rights and governance, which could potentially create a more stable environment for economic growth. 2

Perspective on Currency Value

Critics argue that the current forex rate for the dinar does not accurately reflect the true value of the currency given Iraq's oil economy. 3 Al-Badrani's article suggests that the dinar's value is suppressed, and a more realistic rate would better represent Iraq's economic potential.

Path Forward

Al-Badrani's article highlights the need for Iraq to progress economically to strengthen the dinar. This includes private sector development, labor market reforms, financial sector modernization, and restructuring state-owned banks. 6Addressing these areas could lead to higher economic growth, a stronger dinar, and reduced vulnerability to oil price volatility.

Conclusion

The strength of the Iraqi dinar is inextricably linked to the country's economic health. Al-Badrani's analysis underscores the importance of comprehensive economic reforms and diversification to ensure long-term stability. As Iraq continues to navigate its economic challenges, the strength of the dinar will remain a key indicator of the country's overall economic performance.