WHAT DOES FIXING THE DOLLAR EXCHANGE RATE AT 1300 IN THE 2026 BUDGET MEAN? AND DOES THE CENTRAL BANK HAVE A PLAN TO CONTROL EXCHANGE RATE FLUCTUATIONS? A SUDANESE ADVISOR EXPLAINS
As the Iraqi government seeks to consolidate economic stability and enhance confidence in fiscal and monetary policies, exchange rate decisions stand out as one of the most important indicators affecting the state budget and the course of the macroeconomy.
As the 2026 budget is being prepared, attention is turning to the directions of the Central Bank and the government in managing the value of the Iraqi dinar, especially in light of the challenges of inflation, financing public spending, and maintaining foreign reserves.
Regarding the stabilization of the dollar exchange rate , the Central Bank addressed the Budget Department at the Ministry of Finance concerning the draft Federal General Budget Law for the Republic of Iraq for the year 2026.
The Central Bank stated that “the official exchange rate that will be adopted in 2026 is (1300) dinars per dollar, which has been in effect since February 2023.”
Sources revealed that “the Central Bank will buy dollars at a price of 1300 dinars from the Ministry of Finance and sell them at a price of 1310 dinars to banks, which will sell them at 1320 dinars to traders and foreign transfers.”
REGARDING THE IMPACT OF THE PEG
, and commenting on this address, the Prime Minister’s Advisor for Economic and Financial Affairs, Mazhar Muhammad Salih, revealed the dimensions and effects of the Central Bank of Iraq’s decision to peg the official exchange rate at 1300 dinars to the US dollar within the 2026 budget project, stressing that the decision comes within the framework of a well-thought-out economic vision aimed at enhancing the overall stability of the national economy.
Saleh told Iraq Observer that fixing the exchange rate at this level reflects a calculated coordination between fiscal and monetary policies, and is a step towards raising the real value of the Iraqi dinar in a limited way, in line with the reality of economic indicators and the available capacity of monetary policy.
He explained that the decision represents a positive message to local and international markets, as it is based on the strength of the central bank’s foreign reserves and its ability to manage monetary stability with high confidence, without resorting to exceptional tools that may disrupt the economic balance.
Saleh pointed out that the government’s fiscal policy is moving towards maximizing real revenues and diversifying their sources, away from what is known as “monetary adjustment,” which relies on the exchange rate as an indirect means of financing the budget, stressing that this shift promotes reliance on authentic and more sustainable financial instruments in controlling spending and mobilizing resources.
The advisor stressed that fixing the exchange rate sends a clear signal of the priority of containing inflation and maintaining economic stability, while emphasizing the independence of monetary policy and pushing fiscal policy towards greater efficiency and discipline, in order to achieve a sustainable balance in the Iraqi economy and protect the purchasing power of citizens in the medium and long term.
Ultimately, the decision to fix the official exchange rate reflects an economic vision aimed at achieving a calculated balance between the requirements of monetary stability and the objectives of fiscal policy, thereby ensuring sustainable growth and protecting the purchasing power of citizens.
