DINAR REVALUATION REPORT: 🇮🇶 How Important Is the Oil & Gas Law for the Iraqi Dinar Exchange Rate Reform?

DINAR REVALUATION REPORT: 

🇮🇶 How Important Is the Oil & Gas Law for the Iraqi Dinar Exchange Rate Reform?

📰 Context from the Article

The article highlights the ongoing feud between the Iraqi Federal Government in Baghdad and the Kurdistan Regional Government (KRG) over:

• Control of oil revenues,

• Management of oil exports from the Kurdistan region,

• And delayed salary payments used as political leverage.

This standoff is destabilizing both the political and economic landscape of Iraq.

🔗 Direct Link to the Exchange Rate Reform

1. Oil is the foundation of Iraq’s rentier economy

• Over 90% of Iraq's national budget relies on oil revenues.

• Without a clear and unified Oil & Gas Law, the state lacks centralized control over its oil sector, leading to:

  • Revenue uncertainty,

  • Weak fiscal planning,

  • And loss of investor and international confidence.

✅ Impact on exchange rate reform:
The Central Bank of Iraq (CBI) cannot stabilize the dinar without reliable and centralized inflows of oil-related foreign currency (mostly USD).

2. No law = No legal security for investors

• The absence of a federal Oil & Gas Law means:

  • Contracts signed by the KRG with foreign oil companies are not recognized by Baghdad.

  • Investors view the sector as legally unstable and politically risky.

✅ Impact on exchange rate reform:
Without sustained foreign direct investment (FDI) in oil and gas, foreign currency inflows are limited, undermining support for the Iraqi dinar.

3. Lack of fiscal unity weakens monetary policy

• The Baghdad–Erbil feud creates a fragmented economic system:

  • KRG exports oil independently.

  • Oil revenues are not fully transferred to the national treasury.

  • This limits the Central Bank’s ability to forecast USD supply and control inflation.

✅ Impact on exchange rate reform:
A country with two conflicting fiscal systems cannot maintain a predictable or unified exchange rate, nor meet IMF and international standards.

📌 Conclusion: How important is passing the Oil & Gas Law?

✅ It is absolutely essential.
The Iraqi dinar exchange rate reform cannot succeed without the passage of a Federal Oil & Gas Law that:

1. Centralizes oil revenues under one national system.

2. Defines fair revenue sharing between the federal and regional governments.

3. Builds investor confidence through legal clarity and national unity.

💡 In summary:

Without a Federal Oil & Gas Law, Iraq will remain trapped in internal power struggles that undermine financial stability, deter investment, and weaken the dinar’s value. The law is just as critical as the Central Bank's monetary tools in exchange rate reform.

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SOURCE: DINARREVALUATION