The Dinar Is Recovering. Four Painful Blows To The Parallel Dollar Reveal The Successes Of The Iraqi Economic Program.
July 26, 2025 Baghdad / Iraq Observer
The US dollar in Iraq is witnessing significant and sustained decline against the national dinar, following a significant period of fluctuation far from the official exchange rate. This was not arbitrary, but rather the result of a comprehensive economic policy pursued by the Iraqi government as part of a reform vision it envisioned within its program. Amid escalating debate over the stability of the Iraqi market and the varying indicators associated with the dollar exchange rate, the Prime Minister's financial advisor, Mazhar Mohammed Salih, issued detailed statements revealing the reasons for the continued decline in the value of the dollar on the parallel market,
compared to a significant rise in the strength of the Iraqi dinar.
He also emphasized that this shift was not a coincidence, but rather the direct result of a series of coordinated government measures across monetary, fiscal, and trade policies implemented over the past two years.
*4 main reasons
Saleh attributed the decline in the dollar exchange rate on the parallel market,
which is now approaching the official rate, to four main reasons. Speaking to Iraq Observer, he said,
"The first factor is the strict legal ban on dollar trading in domestic transactions, particularly in the real estate market, which is one of the largest and strongest financial markets in the country.
This has reduced the scope for informal foreign currency trading." He added that the second reason relates to "the shift in monetary policy toward direct foreign exchange support via international banks that correspond with national banks for external transfer purposes,
in contrast to the discontinuation of the Central Bank's currency selling window at the beginning of this year." He noted that "this policy has limited reliance on the parallel market and the risks of unsafe and high-cost financing."
Observers describe this step as "not just a technical choice,
but rather a comprehensive strategy to connect Iraqi banks to the international financial system without the need for dubious or unclearly compliant local channels.
Thus, the map of foreign transfers was redrawn to be conducted legally and regulated, gradually reducing the influence of the parallel market and currency exchange companies, which had previously acted as intermediaries between importers and exporters and set prices as they pleased."
* Liberalization of small importers
The third reason, according to the government advisor, relates to “small importers’ access to the official foreign currency financing network without the need for intermediaries from money transfer companies.
This has enabled them to import at a fixed, official exchange rate and has contributed to reducing costs and enhancing compliance, especially since this segment represents approximately 60% of the volume of foreign trade.”
He emphasized that “this facilitation came about thanks to government measures that reduced administrative bureaucracy.” With this opening, exchange rates for these traders became fixed at the official rate (1,320 dinars to the dollar), which caused the parallel market to lose a large segment of its customers, who had been the primary fuel for the increased demand for dollars outside of official channels.
He pointed out that the * Payment cards... another reason
fourth factor is the "expansion of the culture of using foreign currency electronic payment cards among travelers over the past two years, rather than putting pressure on the cash dollar market, in addition to the availability of cash dollars to travelers at airports through national banks, subject to flexible and highly compliant regulatory controls."
In the past, travelers preferred to carry large amounts of dollars in cash, creating additional demand for hard currency in the local market, especially during travel, tourism, or study seasons.
Consequently, the switch to bank cards has contributed to market stability and reduced speculation. Saleh concluded his remarks by emphasizing that "the price defense policy adopted by the state, through the establishment of cooperatives for consumer goods and the construction basket funded at the official exchange rate of 1,320 dinars to the dollar, represents an integral part of the success of economic policy in Iraq, through the harmonization of monetary, financial, and commercial efforts within the government program."
With the continued flow of dollars into official channels, the expansion of financial oversight tools, and the promotion of a culture of electronic payments, the Iraqi dinar is now gradually approaching the rate officially set by the Central Bank of Iraq.
* Government efforts...the decisive role
For his part, economic expert Safwan Qusay says that the dinar's appreciation against the dollar comes against the backdrop of the Central Bank of Iraq's reserves rising to more than $97 billion, in addition to gold reserves exceeding 132 tons.
This boosts confidence in the Iraqi economy and provides significant support to the value of the local currency. In an interview with Iraq Observer, the economic expert emphasized the positive outlook for increasing non-oil revenues and the government's ongoing efforts to halt gas flaring and develop energy and development projects.
He noted that adjusting the public spending structure toward sustainability plays a crucial role in achieving economic and financial stability.
According to Qusay, maintaining and developing positive relations with the United States and the Gulf states could significantly boost the value of the Iraqi dinar,
especially following US President Donald Trump's speech encouraging support for US exports to Iraq.
Qusay emphasized that the exit of Syria and Lebanon from the risk zone directly contributed to supporting financial stability in Iraq, which positively impacted the dinar exchange rate. https://observeriraq.net/الدينار-يستعيد-عافيته-أربع-ضربات-موجع/