📉 Highlights: Why the Dollar Is Dropping Against the Iraqi Dinar 🇮🇶💵
🧠 Expert Insight: Economist Munar Al-Obaidi says the dinar is strengthening due to multiple economic & policy shifts.
🏦 Key Reasons for Dollar Decline:
🔻 Economic Contraction: Reduced consumer confidence & spending = less need for USD in trade.
🛑 Gov’t Investment Halt: Shift from investment to operational spending lowered overall demand—including for dollars.
📊 Reduced Parallel Market Pressure:
Tighter border controls cut smuggling & fake invoices
Traders shifting to formal banking systems
Decrease in re-exports lowered USD demand
💼 New Payment Practices:
Iraq paying foreign companies in black oil & naphtha, not cash = less need for CBI dollar sales
🗳️ Election Spending: Campaigns converting stored USD into dinars = more USD supply in market
🌍 Increased Visitors: Foreign arrivals bringing in more hard currency = stronger dollar availability
🚫 Border Closures: Syria border shutdown disrupted illicit trade, slashing black-market USD demand
💸 Dinar Supply Tightened: Central Bank withdrew dinars from circulation = increased demand for dinar
📈 Result: More demand for IQD, less pressure on USD → exchange rate shift in favor of the dinar
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Among Them Is The Economic Contraction.. An Expert Reveals The Reasons Behind The Decline In The Exchange Rate.
July 31, 2025 Baghdad/Iraq Observer Economic expert Munar Al-Obaidi confirmed that the exchange rate of the US dollar against the Iraqi dinar has witnessed a significant decline recently.
This decline is due to a group of intertwined economic and procedural factors, which vary in their level of influence but have collectively contributed to strengthening the dinar.
Al-Obaidi told the Iraq Observer that “the reasons for the dollar’s decline include the economic contraction and declining consumer confidence.
The state of uncertainty in the Iraqi market, as a result of the economic slowdown, has led to a decline in the confidence of individuals and institutions in spending, which has negatively impacted the volume of public demand, thus reducing the need for the dollar as a stimulus for trade.
In addition, the halt in government investment spending has led to the government focusing on operational spending rather than investment spending, leading to a decline in economic activity.”
He added that "the general budget is the primary driver of economic activity, and reducing investment spending has reduced aggregate demand, including demand for the dollar."
He noted that "other reasons include :
tightening controls at border crossings and
government measures to curb smuggling and regulate relations with the Kurdistan Region, which have contributed to reducing the phenomenon of inflated invoices, which has reduced the unreal demand for dollars in the parallel market."
Regarding the shift of traders to the formal banking system, Al-Abidi explained that “the markets have witnessed the entry of a large segment of traders into the formal banking system, and their reliance on the official dollar exchange rate through approved platforms, which has reduced the volume of trading in the parallel market and reduced pressure on the dollar, in addition to a decline in re-export operations.
The decline in the re-export of goods to neighboring countries has led to a reduction in demand for imported goods, which has directly reflected in a decline in the need for dollars to finance these commercial operations.”
He emphasized that "settling major companies' dues in oil products instead of cash also had an impact on depreciating the dollar, as the government settled a portion of foreign companies' dues in black oil and naphtha instead of cash, reducing reliance on dollars sold by the Central Bank and increasing their supply in the market."
He pointed out that “preparations for the electoral process also play a role.
With the start of the election season, the volume of spending related to the electoral campaigns increased, and this spending is often financed from cash reserves stored in dollars, which necessitated converting large amounts of them into dinars to cover campaign expenses, thus increasing the supply of dollars and increasing the number of foreign visitors and arrivals.
The increasing number of arrivals to Iraq contributed to the introduction of quantities of foreign currencies into the local market, which provided an additional source of hard currency outside the framework of central bank sales, and contributed to strengthening the availability of dollars.” He continued, saying,
"The halt to illicit trade as a result of the closure of the border with Syria played a significant role in the decline of the dollar.
The closure of border crossings with Syria contributed to the reduction of smuggling and illegal trade, which had been heavily dependent on the dollar in the parallel market, leading to a further decline in demand for the dollar."
He concluded by saying, "The decline in the issued currency and the withdrawal of a portion of it from the market is another reason behind the decline in the dollar price.
The Central Bank of Iraq withdrew a portion of the dinar money supply from the market, creating a double demand for the Iraqi dinar against the dollar.
This balance in demand levels between the two currencies helped boost the value of the dinar and raise its exchange rate against the dollar on the parallel market." https://observeriraq.net/بينها-الانكماش-الاقتصادي-خبير-يكشف-ال/