🇮🇶 Clare & Jeff: Iraq Rejects Dinar Devaluation — Understanding the 1:1 Exchange
Why Iraq’s Central Bank Says Devaluation Is Not the Solution
Commentary based on Clare and Jeff
💬 Central Bank Rejects Devaluation
Clare reports that a Sudanese government advisor told Rudaw:
“Devaluing the dinar is the worst way to address the budget deficit.”
Saleh, an Iraqi Central Bank official, reinforced this:
The CBI strongly rejects using devaluation to cover fiscal gaps
The official dollar price will remain at 1,320 IQD
Policy focus remains on structural reform, not short-term currency adjustments
This is a clear signal that Iraq is not moving toward devaluation, but rather planned redenomination.
💱 Jeff Explains 1:1 Redenomination
Some investors hear:
“The dinar will go 1 to 1!”
Jeff clarifies: Yes — but only inside Iraq.
🏪 Inside Iraq: 1:1 Purchasing Power
A 25,000 dinar note today buys a grocery basket
After redenomination, a 25 dinar note buys the exact same basket
This is called purchasing power parity (PPP)
So, within Iraq, it is effectively 1 to 1.
🌐 Outside Iraq: International Value
The international value is separate from domestic PPP
Example: If a 25,000 dinar note equals $75,000, the new 25 dinar note equals $0.75
This reflects exchange rate logic rather than domestic spending power
Jeff emphasizes:
“You have to look at this from two angles — inside Iraq versus outside Iraq.”
🔍 Why Devaluation Is Not an Option
Devaluing to cover budget deficits is problematic:
It erodes public confidence in the currency
It increases inflation risks
It undermines the planned redenomination and economic reforms
It does not address structural fiscal issues
Instead, Iraq is pursuing:
Monetary reform
Redenomination
International trade readiness
Stable internal pricing
⭐ Featured Snippet
Iraq’s Central Bank rejects devaluation to cover budget deficits. Redenomination at 1:1 maintains domestic purchasing power but differs internationally.
❓ Q&A: Clare & Jeff on Dinar Reform
Q: Will Iraq devalue the dinar to fix budget gaps?
A: No — the CBI rejects devaluation and keeps the official rate at 1,320 IQD/USD.
Q: What does 1:1 mean?
A: Domestically, prices remain stable — 25,000 IQD today equals 25 IQD after redenomination.
Q: How does this affect international exchange?
A: Internationally, value is scaled — a 25 IQD note abroad may only equal $0.75 if the original note was 25,000 IQD.
Q: Why is redenomination safer than devaluation?
A: It preserves purchasing power, prevents inflation, and supports structural economic reforms.
🧠 Final Thoughts
Iraq’s monetary reform is carefully planned, avoiding the pitfalls of reactive devaluation.
Domestic 1:1 redenomination protects citizens
International exchange rates are managed separately
Fiscal health depends on structural reforms, not short-term shocks
This is a controlled, deliberate approach rather than a rushed currency adjustment.
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Clare
Article: "An advisor to the Sudanese government told Rudaw: Devaluing the dinar is the worst way to address the budget deficit"
Quote: "Saleh, stated that the Central Bank of Iraq strongly rejects resorting to devaluing the dinar against the dollar to cover the budget deficit, stressing that "the official price of the dollar will remain as it is at 1320 dinars..."
Jeff
Some of you say, 'We've heard this will be 1 to 1.' Technically, yeah, it's going to be 1 to 1. But you got to look at this from two different angles...Hear me carefully on this. It'll be 1 to 1 only within the country of Iraq, not outside. Here's why...
Whatever you can buy at the grocery store for a 25,000 dinar note...you'll be able to buy the same exact items with a 25 dinar note after. So yeah, in the country of Iraq it'll be 1 to 1...What about outside Iraq?
There's the dinar against foreign currency value...Let's use a $3.00 as example. You would have a 25,000 note that would be worth $75,000. A 25 note is worth $0.75 cents.
