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In the past, rate changes for the Iraqi dinar have been managed by the Central Bank of Iraq (CBI), which holds the authority to set and adjust the currency's exchange rate. The CBI operates as an independent institution,
established under the Central Bank of Iraq Law of 2004, with the primary objectives of ensuring domestic price stability and overseeing monetary policy. Historically, its decisions on exchange rates have often been influenced by economic conditions, international guidance (notably from the International Monetary Fund, or IMF), and Iraq’s heavy reliance on oil revenues.
One significant example occurred on December 19, 2020, (Covid)
when the CBI devalued the Iraqi dinar by approximately 24%. This adjustment changed the official exchange rate from 1,182 IQD per USD to 1,450 IQD per USD for commercial transactions (with a slightly lower rate of 1,470 IQD per USD for the public).
The decision was driven by a severe liquidity crisis, triggered by low oil prices and the economic fallout from the COVID-19 pandemic, which slashed government revenue. The CBI announced this devaluation as a deliberate policy move to bolster fiscal stability, following consultations with the IMF and the Iraqi government. The process involved the CBI issuing an official statement and adjusting the pegged exchange rate, which it maintains against the U.S. dollar rather than allowing the dinar to float freely on global markets.
Another notable instance was the introduction of the "new Iraqi dinar" in 2003–2004, following the fall of Saddam Hussein’s regime. The Coalition Provisional Authority (CPA), in coordination with the newly restructured CBI, oversaw the replacement of the old "Saddam dinar" and the "Swiss dinar" (used in Kurdish regions) with a unified currency.
Between October 15, 2003, and January 15, 2004, the CBI facilitated this exchange at a fixed rate—initially set at 1 new IQD to 1 Swiss dinar and 1 new IQD to 150 old dinars—without altering the currency’s underlying value at that stage. This was more of a redenomination and unification effort than a rate change, but it demonstrates the CBI’s role in executing currency policy under exceptional circumstances, with support from external authorities like the CPA.
The mechanism for these changes typically involves the CBI’s board approving the adjustment, followed by an official announcement and implementation through its control over foreign exchange auctions and banking regulations.
The dinar’s exchange rate has historically been fixed or "pegged" to the U.S. dollar, a policy the CBI uses to anchor inflation, as noted by the IMF in its assessments of Iraq’s economy. Adjustments require balancing domestic economic needs—such as controlling inflation or addressing budget deficits—with external pressures like oil market fluctuations and IMF recommendations.
In summary, past rate changes in Iraq have been executed by the Central Bank of Iraq, often in response to economic crises or structural reforms, with the process involving official policy shifts to the fixed exchange rate. The CBI acts independently but coordinates with the Iraqi government and international bodies when necessary.
