GOLDILOCKS
The announcement that the value of investment licenses in Iraq has reached $88 billion could potentially influence the value of the Iraqi dinar, but the extent and direction of that influence depend on several factors. Let’s break it down.
Iraq’s economy is heavily reliant on oil, which accounts for the vast majority of its government revenue and foreign exchange earnings.
The Iraqi dinar’s value is managed by the Central Bank of Iraq (CBI) through a controlled exchange rate regime, rather than being freely determined by market forces.
This means any impact from investment licenses on the dinar’s value would likely occur indirectly, through economic fundamentals, rather than immediate market speculation.
If these $88 billion in investment licenses translate into real, productive projects, let's say in infrastructure, energy, or non-oil sectors, they could boost Iraq’s economic growth, diversify its revenue streams, and strengthen its fiscal position. Over time, this might increase confidence in the economy, potentially putting upward pressure on the dinar’s value. For example, successful investments could attract more foreign capital, increase demand for the dinar in transactions, and bolster Iraq’s foreign exchange reserves, which stood at $97 billion in 2022 according to the IMF. A stronger reserve position could give the CBI more flexibility to adjust the exchange rate favorably.
Historically, speculation about the dinar’s value has been fueled by Iraq’s oil wealth and comparisons to currencies like the Kuwaiti dinar, which recovered post-Gulf War. But Iraq’s ongoing sectarian tensions, governance challenges, and a lack of economic diversification make a dramatic revaluation unlikely without structural reforms. The $88 billion figure alone doesn’t change that equation overnight.
So, will it influence the dinar’s value? Possibly, but not immediately or dramatically. If the investments materialize and diversify the economy, they could lay the groundwork for a stronger dinar in the future, perhaps prompting the CBI to tweak the peg. But absent concrete progress and broader stability, the impact might be more noise than substance. For now, the dinar’s trajectory hinges more on oil prices, government policy, and regional dynamics than on this headline number.
© Goldilocks
https://ina.iq/eng/39215-pm-the-value-of-investment-licenses-in-iraq-reaches-88-billion.html
