Iraq has officially devalued its currency again, setting a new official exchange rate of 1,500 Iraqi dinars per US dollar, according to a document seen by The National.
The Council of Ministers approved the move late on Tuesday, based on a recommendation from the Central Bank of Iraq, the banking regulator said in a directive sent to all licensed banks, electronic payment companies and exchange houses on Monday.
According to the directive, the new structure is that the central bank will purchase from the Ministry of Finance at the price of 1,500 dinars. The sale price to banks will be at 1,510 dinars, and then to the public at 1,520 dinars.
All institutions were ordered to update their systems, notify branches, stop using the previous rate, and adopt the new price from the start of business on Tuesday, the document says.
It is Iraq’s second major devaluation in six years. In December 2020, during the Covid-19 oil crash, the central bank cut the dinar rate from 1,182 to 1,450 per dollar to cover a crippling deficit. That rate was later adjusted to 1,320 as the official rate under the previous government, though the market rate often hovered higher.
This time, the decision is driven by a deepening cash crunch since the outbreak of the Iran-Israel war in June 2025 and the intermittent closure and threat to the Strait of Hormuz.
Iraq earns more than 90 per cent of its budget in dollars from oil exports, almost all of which must pass through Hormuz – the narrow waterway carrying a third of the world’s seaborne oil.
Since the Iran war broke out on February 28, shipping insurance costs have soared, tanker traffic has been disrupted, and Iraq’s oil loadings from its southern terminals at Basra have faced delays and discounts.
The result: Iraq gets fewer dollars, and when it converts those dollars into dinars to pay nearly eight million public employees, contractors, farmers and pensioners, it needs more dinars than it has.
In recent months, Baghdad has delayed salary payments in several provinces, deferred payments to wheat farmers and construction firms, and relied on short-term borrowing from state banks. The country's finance ministry warned parliament that without adjustment, it could not fund the 2026 budget, which includes 100,000 new public jobs demanded by political blocs as part of government formation talks.
Devaluation is the fastest fix. By lowering the dinar’s value from 1,320 to 1,500, the government gets about 13 per cent more dinars for every dollar of oil it sells – enough to print salaries without printing dollars it does not have.
But the cost is passed to Iraqis. A weaker dinar makes imported food, medicine, cars and construction materials – almost everything Iraq imports – more expensive. After the 2020 devaluation, inflation jumped and triggered protests in southern provinces.
