Expert warns against changing the exchange rate: A bigger mistake than the last adjustment
Economic expert, Abdul Rahman Al Mashhadani, warned against changing the official exchange rate and returning it to 145 thousand dinars for every 100 dollars.
Al-Mashhadani told {Euphrates News}: “There is talk about the idea of changing the official exchange rate and returning it to 145,000 dinars per 100 dollars,” warning that “this measure will be a bigger mistake than the last amendment.”
He stressed that “the dollar exchange rates in the parallel market have stabilized for a long time at the threshold of 151,000 dinars per 100 dollars,” noting that “this difference has nothing to do with the 2025 budget schedules, as it will not differ much from the 2024 budget.”
Al-Mashhadani pointed to “a desire to stabilize the price of a barrel of oil at $60 with a move to reduce investment expenditures, due to the large and ongoing financial deficit in the budget,” adding that “the gap between the dollar in the parallel market and the official rate will remain as it is.”
He explained that “the dollar exchange rates will not stabilize due to a gap in demand, as Iranian goods constitute a large part of the market, and imports continue at a rate ranging between $25 and $35 million per month, with these funds being financed from the parallel market instead of Central Bank transfers.”
The economic expert concluded by stressing that “the exchange rate between the parallel and official market will remain the same unless trade is regulated and included in the Central Bank’s transfers.”
Between economic experts’ warnings and government denial, the value of the Iraqi dinar is at stake
An informed government source denied, on Tuesday (January 28, 2025), that the Iraqi government has any intention to reduce the value of the dinar against the dollar, despite rumors indicating upcoming measures to confront economic pressures and challenges in the international market.
The source confirmed that “the news about the government’s intention to reduce the value of the dinar against the dollar is absolutely incorrect.” He added: “The government is working to stabilize the official exchange rate set by the Central Bank, and seeks to control the parallel market. Any change in the exchange rate during the current stage or within the 2025 budget schedules will lead to negative results, and that is why the government is committed to strengthening the current rate.”
A different economic vision
In contrast, economist Ziad Al-Hashemi believes that reducing the value of the dinar to 1,450 dinars against the dollar could be a possible step to deal with the repercussions of the economic crises. Al-Hashemi said: “This measure may reduce the financial pressure on the government and reduce the cost of supporting the dinar, but it will negatively affect citizens through deteriorating salaries and rising prices of goods and services.”
Al-Hashemi added: “Devaluing the currency may lead to increased inflation rates due to the loss of confidence in the dinar and the increase in demand for the dollar. This decision, despite its limited positive impact in the short term, will have long-term consequences on the markets and the lives of the Iraqi citizen.”
The political aspect and Trump’s role
On the political front, political affairs expert Nabil Al-Azzawi pointed out that US President Donald Trump, who is expected to return to the White House, may change his policies towards Iraq. Al-Azzawi explained: “Trump, as an economist, realizes that politics is managed through economics. Despite the previous tense relations, indications are that he will deal cautiously with the Iraqi file.”
Al-Azzawi praised what he described as the “wisdom of Al-Sudani’s government” in sparing Iraq political crises and international sanctions, considering that relations between Baghdad and Washington may witness positive development after activating the security agreement and strengthening mutual interests.
Between denial and warnings
With conflicting positions between government denial and economic warnings, it seems that the Iraqi government is facing a challenge in maintaining the stability of the currency and avoiding the negative repercussions of any ill-considered action.
While economic pressures are increasing, the Iraqi citizen remains the most affected by any change in financial policies.
This file resolves a delicate balance between government decisions and economic recommendations, to ensure financial stability and protect citizens from the repercussions of any decisions that may affect their daily lives.