DINAR REVALUATION REPORT: Central Bank's Efforts to Strengthen the Iraqi Dinar Value in 2024, 11 SEPT

Central Bank's Efforts to Strengthen the Iraqi Dinar Value in 2024

In 2024, the Central Bank of Iraq (CBI) has embarked on a series of measures to bolster the value of the Iraqi dinar (IQD). 1 Recognizing the importance of a stable currency for economic growth and financial stability, the CBI's initiatives are part of a broader strategy to enhance the Iraqi economy and improve living standards.

Economic Rebound and Inflation Control

Following the fiscal expansion starting in 2023, the Iraqi economy has experienced a strong recovery in its non-oil sector. 1 This has been supported by domestic stability, improved conditions, and the implementation of Iraq’s first three-year budget. Inflation has also declined to 4 percent by the end of 2023, partly due to a currency revaluation in February 2023, as well as the normalization in trade finance. 1

Fiscal and External Challenges

However, the ongoing fiscal expansion has also led to imbalances, with concerns over the large fiscal expansion and lower oil prices. The CBI is aware that without policy adjustment, there is a high risk of medium-term sovereign debt stress and potential external stability risks.  1

Currency Issuance and Dollar Supply

The amount of dinars circulating outside banks has been increasing daily, reaching 93.1 trillion dinars by the end of December 2023. 2 This has raised questions about the value of dinars in the market, especially if oil prices remain unfavorable and do not support the dollar inflow that traditionally underpins the dinar issuance. 2

Controlling Dollar Usage

In an effort to eliminate the use of the US dollar in the local market, Iraq's measures have achieved relative success in controlling foreign currency. 3 The exchange rate of the dollar has been stabilized between 1,470 to 1,450 dinars per dollar, down from an unprecedented level of 1,700 dinars per dollar in 2023. 3

Coordination with the Finance Committee

The CBI has been in close coordination with the Finance Committee to enhance the value of the Iraqi dinar. 4 Discussions have focused on monetary policy, methods to increase the dinar's value, stabilizing the market, and addressing deficits. 4

Future Plans and International Standards

The CBI has also discussed future plans to improve banking institutions, expand relations with international banks, and restructure the banking sector.  4 Emphasis has been placed on transitioning towards electronic payments and the potential amendment of the Central Bank law to align with international standards. 4

Conclusion

The CBI's efforts to strengthen the Iraqi dinar in 2024 involve a multi-faceted approach, including fiscal policy adjustments, controlling the dollar supply, and aligning with international banking standards. These measures aim to create a stable and robust economy, enhancing the value of the dinar for the benefit of Iraq and its citizens.