BAGHDAD: The Central Bank of Iraq weakened the Iraqi dinar by about 13% on Wednesday, setting the public cash rate at 1,520 dinars per US dollar, up from roughly 1,320.
Separate rates apply to government and banking transactions. Under the new structure, the central bank buys dollars from the Finance Ministry at 1,500 dinars each and sells them to banks at 1,510.
Shipping disruptions through the Strait of Hormuz have squeezed Iraq’s oil exports and foreign-currency earnings. Bloomberg estimates put crude exports at about 1.25 million barrels a day since March, compared with almost 3.5 million barrels a day last year.
Its chief emerging-market economist, Ziad Daoud, said Baghdad had prioritised paying public-sector salaries over defending the currency’s value. “Every past oil shock has pushed Iraq into trouble,” he said.
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Foreign-exchange reserves fell to $80 billion in August from roughly $100 billion when the war began. Meanwhile, public-sector salaries alone cost about $5 billion a month, according to Daoud.
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A weaker exchange rate gives the government more dinars for each dollar earned from remaining oil sales. However, it also raises the local-currency cost of imports and can push up consumer prices.
Despite the pressure, the central bank maintained that its foreign reserves could meet demand for trade financing, overseas bank-card payments and cash for travellers without restrictions.
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The new rates took effect at the start of business on Wednesday. Iraq raised the public dollar-selling rate to 1,520 dinars from roughly 1,320, reducing the dinar’s dollar value by about 13%.
