I strongly believe that the CBI has broken the proverbial back of the camel, yes, the back of the parallel market...
it is evidenced in an article titled “THE DOLLAR’S DECLINE IS IN THE INTEREST OF CITIZENS AND STRENGTHENS THE PURCHASING POWER OF THE DINAR.” ...
Hamid Abu Firas, owner of a money exchange company, explained...that “this fluctuation in the exchange rate cannot be called a fall in the dollar price, but rather an increase in the value of the Iraqi dinar against other currencies."
Folks this statement by Firas is a “WOW!” statement. We are hearing this from a money exchanger. These are the people who want the dollar to rise not decline and so this is a very important truth he had to now admit.
Foreign reserves between inflation targeting and external rent shocks
5/29/2025
Dr. Haitham Hamid Mutlaq Al-Mansour
Monetary policy relies on a fixed exchange rate system to guide the real exchange rate towards the short-term target inflation rate.
This system is appropriate for the Iraqi economy, as real output values are linked to global prices due to the unilateral structure of the economy and the sharp decline in the contribution of non-oil exports to fixed capital formation.
Therefore, the fixed exchange rate system was a realistic option to avoid the erosion of the value of the dinar.
Due to the impact of external rent shocks, controlling foreign reserves (dollars, gold, and securities included on the asset side of the Central Bank’s balance sheet as Iraq’s external debt) has become an instrumental approach to managing the Central Bank’s responses to the aforementioned shocks.
This involves regulating exchange rate fluctuations, targeting inflation rates. Inflation can rise and fall due to external rent shocks, leading to fluctuations.
Therefore, the Central Bank uses its reserves to sterilize the dinar’s expansion through dollar purchases and sales, and cash transactions in the stock market, both buying and selling, to achieve the target exchange rate.
The movement of foreign reserves is linked to public spending on oil revenues in dollars after the Central Bank exchanges them for dinars to meet demand from the private and public sectors, as well as government and household purchases. Depending on the surplus and deficit in the balance of payments, reserves grow or shrink. When oil revenues rise, the central bank refrains from financing the budget deficit, and the government reduces its spending, aiming to
raise foreign reserves to be used to finance the budget deficit when oil revenues decline again.
Foreign reserves witnessed a significant increase due to the positive shock in the second half of 2021, reaching 3.244 million barrels per day at an average price of $110 per barrel.
This increased Iraq’s surplus in public finances and overall external balances, as reserves exceeded $90 billion, helping to stabilize the stabilization system and inflation targeting. However, with global oil prices heading towards a negative shock this year (2025) to less than $60 per barrel, and the Central Bank continuing its sterilization policies and measures towards international compliance, this led to a decline in reserves to less than $97 billion in March 2025, after having been around $105 billion in December 2024. Due to the recent shock, the Central Bank resorted to compensating by increasing its foreign exchange sales.
Therefore, in light of external rent shocks, we see the need for coordination between government policy and the Central Bank. From the government policy side, spending must be restricted to purely technical limits, thus deepening the reduction of the government deficit and strengthening the strategic role of reserves. Monetary policy must sustain its goal of achieving a stable inflation rate by managing the movement of the dollar exchange rate and demand for it in the interest of price stability and reducing costs in favor of rational spending policies.
Achieving low and stable inflation is an important factor in enhancing the local and foreign investment climate, which is linked to related economic policies, including commercial, agricultural, and industrial policies.
In short, the dependence of foreign reserve volatility on external shocks will remain a limiting factor in the national economy’s ability to combat inflation and support the investment climate. Therefore, two levels of optimal solutions can be identified.
The first, at the strategic level, involves sustained coordination between fiscal and monetary policies. The second, at the macro and structural level of the Iraqi economy, lies in addressing the rentier nature of the economy by gradually increasing the contribution of non-oil GDP to meet aggregate domestic demand, while supporting export diversification policies. LINK
This [Forex] memo confirms the Iraqi dinar is fully armed for public rate visibility at $4.81 with active infrastructure integration, live suppression staging and institutional level confirmation...
We believe this to be true. What that paragraph means is the IQD is now convertible...
[and] has absolutely no restrictions on the currency at all - Article VIII.
PRIME MINISTER’S ADVISOR: THERE IS NO FINANCIAL CRISIS IN IRAQ AND THE ECONOMIC SITUATION IS UNDER CONTROL.
The Prime Minister’s financial advisor, Mazhar Mohammed Saleh, confirmed on Wednesday that the circulating talk of a financial crisis in the country is “nothing more than rumors,” emphasizing the importance of hedging economic policies in light of the current international circumstances.
Saleh explained that the Iraqi economy relies on oil revenues to finance public expenditures by up to 90%, while government spending constitutes approximately 50% of GDP, which accounts for approximately 85% of total demand and economic activity.
He added, “Current indicators do not point to a financial crisis, thanks to prudent fiscal policies. However, global challenges, such as trade wars and faltering energy markets, require vigilance and caution to maintain the country’s prosperity.”
He pointed out that the oil market is entering the early stages of a price decline cycle, emphasizing that there is close coordination between fiscal and monetary policies to address these challenges through fiscal discipline and controlling revenues and expenditures, in parallel with financing measures that do not negatively impact public spending.
Saleh explained that Iraq has accumulated experience in dealing with oil cycles since 2014, and has succeeded in ensuring economic stability by providing salaries, pensions, and social welfare, supporting agriculture, and strengthening partnerships with the private sector within the government’s reform program.
He concluded by saying, “Securing liquidity to meet the country’s needs is a top priority. There is successful central financial management of this issue, and there are no current concerns in this regard.”
4. We received a lot of intelligence over the weekend. Tony said he didn't share it because it changed every two hours. It went up and down, over and over again.
5. The intelligence went back and forth: UN, IMF, Federal Reserve, banks, etc.
6. It was a roller coaster ride all weekend. Tony said he saved us a lot of trouble by not sharing the information.
7. The RV was scheduled five times over the weekend.
8. Everything is done on Iraq's side; Everything is done by the UN, the IMF, the Federal Reserve, and the US Treasury. By "everything done," he meant countries connected, tariffs charged, and information sent.
9. There was a document, part of which was released, but no one was supposed to see it. It was step-by-step information on how we got to where we are now and the process of where we're going.
10. There were no details about what would be done or how.
11. Everything is finished, but we're waiting.
12. We're at a window waiting for notification, even as this call is being made.
13. Some people were at the bank this morning waiting to switch, but they were told to come back after 2:00 today.
14. Iraq is trying to get it approved.
15. The deadline is from today to Friday.
16. Tony expects it to be completed today.
17. Everything is ready at the banks, we're just waiting for the go signal.
18. We have a few more hours in this window.
19. The exchange rates are good. The bolivar was on the bank's screen.
20. The dinar was worth $4.41.
21. Eight hundred numbers were given to the banks, but they were for them, not us. Each bank was assigned a different number.
22. When Tony asked for information he needed to share with us, he was told they had better information than he was asking for, but couldn't get it until they gave him the 800 number.
23. A piece of advice for us: be prepared for change.
24. Tony was asked if he would accept the higher amount or the exchange rate shown on the screen. Tony said, "Why not just accept the higher amount and keep quiet for 90 days?"
25. This is a once-in-a-lifetime event."
26. All the currencies we've talked about are still in circulation.
27. Everyone says the exchange rate will be delayed today.
28. In Iraq, the exchange rate will be one to one.
29. There's nothing more to be done. Iraq will announce it to its citizens, period.
(Personal note: It's coming, it may or may not be tonight, don't be intimidated by these delays; it's going to happen.)