Collapsing oil revenue forces Iraq to devalue the dinar by 13%

Under the new structure reported by Kuwait Times, the finance ministry will buy dollars at 1,500 dinars and sell them to banks at 1,510, while banks will sell to the public at 1,520. The National highlights 1,500 dinars as the official rate; the two sources are headlining different layers of the same structure. The move from 1,320 to 1,520 amounts to a loss of about 13.2% in the dinar's value against the dollar, though Kuwait Times put it at 14.5%. Iraq's previous large devaluation came in December 2020, when the rate went from 1,182 to 1,450.

The constraint is volume, not price. Kuwait Times says Iraq's exports fell from 3.6 million barrels a day before the war to 2.34 million in August, and foreign-exchange reserves have shrunk by about $20bn. According to the same report, the draft budget assumes an oil price of $58, exports of 4 million barrels a day and spending of 217 trillion dinars, or about $166bn. The projected deficit exceeds 40 trillion dinars. The National says almost all of the oil leaves through Hormuz, Basra terminals are operating with delays and discounts, and salary payments are late in many provinces.

The devaluation earns Baghdad 200 extra dinars for every oil dollar, but pushes up prices of imported food, medicine and vehicles by the same proportion. The National notes that the 2020 devaluation led to inflation and protests in the southern provinces. Gulf News says this is the first time a Gulf Arab state has cut its exchange rate since the war began on 28 February.