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Iraq revalues currency and sets new exchange rate

REUTERS/Ahmed Saad
A man counts Iraqi dinars on a money counting machine at a currency exchange shop in Baghdad on January 23, 2023

Iraq’s cabinet approved a currency revaluation on Tuesday and set the exchange rate at 1,300 dinars per US dollar, a cabinet statement said on Tuesday.

The Iraqi dinar had been selling at 1,470 dinars against the dollar before the New York Federal Reserve introduced tighter controls on international dollar transactions by commercial Iraqi banks in November.

The move by the Federal Reserve was designed to stop the illegal siphoning of dollars to Iran.

In recent weeks the dinar was selling at around 1,690 dinar per dollar.

Under the curbs that took effect in December 2022, Iraqi banks must use an online platform to reveal their transaction details. But most private banks have not registered on the platform and resorted to informal black markets in Baghdad to buy dollars.

This has created dollar shortages as demand has outstripped supply and accelerated the dinar’s descent against the greenback, Iraqi central bank officials and traders say.

Prime Minister Mohammed Al-Sudani replaced the central bank governor on Monday as he had not taken effective steps to tackle the consequences of the new Fed regulations and their impact on the dinar, government sources told Reuters.