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Why won’t the Central Bank of Iraq devalue the dinar?
Economic reports show that devaluing the Iraqi dinar would reduce foreign investors’ profits when converted to dollars, weaken confidence in Iraq’s economy, and discourage new investment—directly harming long-term economic growth.
Clare Disclaimer
The following information is based on translated Iraqi economic reports and commentary shared by Clare.
This content is for informational purposes only and reflects analysis, not financial advice.
Always consult professional financial advisors before making investment decisions.
Economic Report: Why the CBI Refuses to Devalue the Dinar
An important economic report titled:
“An economic report reveals the reasons behind the Central Bank’s refusal to devalue the dinar”
provides critical insight into the Central Bank of Iraq’s (CBI) long-term strategy.
Key Quote from the Report:
“Foreign investors, when converting their profits into their national currencies, will find that their profits decrease as a result of the host country’s exchange rate falling against the dollar, which limits the attraction of new investments.”
Foreign Investment Depends on Currency Stability
The report highlights a fundamental truth of global economics:
Investors seek profit certainty
Currency devaluation reduces real returns
Falling exchange rates discourage new capital inflows
When a local currency weakens:
Profits shrink upon conversion to USD or other major currencies
Risk perception increases
Long-term projects become unattractive
This is why the CBI views currency stability as essential, not optional.
Confidence Is Everything in a Global Economy
The report further explains:
“This situation may also weaken confidence in the country’s economy and negatively affect the process of attracting foreign investments.”
Confidence is the foundation of:
International contracts
Infrastructure development
Oil and non-oil sector growth
Banking sector integration
A deliberate devaluation would signal economic weakness, something Iraq cannot afford at this stage.
Why the 1300 IQD Rate Appears in the 2026 Budget
A second article titled:
“A Sudanese advisor explains the repercussions of fixing the exchange rate at 1300 dinars in the 2026 budget”
adds crucial clarification.
Advisor Saleh Explained:
“The move to adopt the exchange rate of the US dollar at 1300 dinars and to raise the value of the Iraqi dinar in a limited way comes within a calculated coordination between the fiscal and monetary policies.”
Fiscal and Monetary Policy: Working Together
This statement confirms:
The 1300 IQD rate is intentional
It reflects policy coordination, not stagnation
It supports:
Budget stability
Inflation control
Investor confidence
In other words, this is a measured step, not the final destination.
Why the CBI Avoids Sudden Devaluation
From both articles, a clear strategy emerges:
The CBI is focused on:
Protecting foreign investment
Maintaining economic credibility
Coordinating government spending with monetary policy
Preparing Iraq for broader international integration
A sudden devaluation would:
Undermine contracts
Trigger capital flight
Damage long-term growth prospects
What This Means for the Iraqi Dinar
The message from Iraqi economic leadership is clear:
❌ Devaluation is not the goal
❌ Weakening the dinar is not acceptable
✅ Stability and gradual strengthening are preferred
✅ Confidence precedes growth
This aligns with broader expectations of future purchasing power improvement, not regression.
Q&A – Key Takeaways from Clare’s Articles
Q: Why won’t the CBI devalue the dinar?
A: It would reduce investor profits and discourage foreign investment.
Q: Does the 1300 rate mean no future change?
A: No. It reflects budget stability, not the final market rate.
Q: Is the 1300 rate intentional?
A: Yes. It is part of coordinated fiscal and monetary policy.
Q: What do foreign investors care about most?
A: Profit stability, currency confidence, and predictable returns.
Q: Does devaluation weaken an economy’s image?
A: Yes. It signals instability and increases perceived risk.
Strategic Insight
Rather than weakening its currency, Iraq is signaling to the world:
“We protect investor value”
“We prioritize stability”
“We are preparing for sustainable growth”
This approach is consistent with countries positioning themselves for greater international participation.
Final Thoughts
These economic reports reinforce a critical conclusion:
A country that wants foreign investment cannot afford a weak or unstable currency.
By refusing to devalue the dinar and carefully managing the 1300 IQD rate within the 2026 budget, Iraq is choosing credibility over chaos — a necessary step before any major currency evolution.
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Clare
Article: "An economic report reveals the reasons behind the Central Bank's refusal to devalue the dinar"
Quote: “Foreign investors, when converting their profits into their national currencies, will find that their profits decrease as a result of the host country’s exchange rate falling against the dollar, which limits the attraction of new investments. This situation may also weaken confidence in the country’s economy and negatively affect the process of attracting foreign investments.”
Article: "A Sudanese advisor explains...the repercussions of fixing the exchange rate at 1300 dinars in the 2026 budget"
Quote: "Saleh, confirmed on Thursday that the move to adopt the exchange rate of the US dollar at 1300 dinars and to raise the value of the Iraqi dinar in a limited way comes within a calculated coordination between the fiscal and monetary policies."