ERBIL, Kurdistan Region — The dinar-dollar exchange rate will be fixed for the next five years, a member of the Iraqi parliament’s finance committee told state media on Sunday.
“The exchange rate will remain at this rate for the next five years,” Naji al-Saidi told state media.
According to Saidi, the government had three main reasons to devalue the dinar: to reduce the deficit in the budget, to increase reserves, and to make domestic goods more competitive in markets.
In the 2021 budget law, the Iraqi parliament voted on setting the price of the dinar at 1,450 dinars per dollar.
Iraqi state media announced on December 19 that the Central Bank would set the dollar at 1,470 IQD for the public.
The devaluation of the Iraqi dinar is a step towards reform and creating a “financial balance” that will revive the economy, Iraq’s Minister of Finance said at the time.
A member of the finance committee said in January that the devaluation will save the country around 12 trillion dinars in 2021.
The devaluation of the dinar struck the public hard as government employees get paid in dinar, and they would be able to afford less with their salaries given that many imported goods are paid for in dollars.
The spokesperson for Iraq’s Ministry of Planning told state media in April that the devaluation had caused inflation to increase by around 5 percent and that primary poverty indicators rose between 26 and 27 percent.
Iraq has been gripped by an economic crisis, exacerbated by a drop in oil prices and the global coronavirus pandemic, which has left many unemployed. The devaluation of the dinar only added to the financial burden on people.
The country has almost exclusively relied on oil revenues since the US invasion in 2003. In June last year, Iraqi Prime Minister Mustafa al-Kadhimi stated that the country currently gets 94.7 percent of its income from oil sales, a business that is also carried out in dollars.
Iraq’s poverty rate stood at about 20 percent before the coronavirus pandemic – but in November, the World Bank Group estimated the poverty rate in Iraq will increase by seven to 14 percent, calling on Baghdad to introduce urgent economic reforms.
At the time the devaluation was decided, influential Shiite cleric Muqtada al-Sadr voiced his skepticism of the measure’s ability to alleviate public suffering.
“The Central Bank and all other banks are prisoners of corruption and corrupters. The government and parliament must seek specialized methods to end this and liberalize it immediately. It is not,” Sadr tweeted on December 19.
Iraqi demonstrators took to Baghdad’s protest epicenter Tahrir Square on December 21 to air their discontent after the government's decision to devalue the country's currency.