Why the Dollar Is Dropping Against the Iraqi Dinar 🇮🇶💵

 
July 31, 2025  Baghdad/Iraq Observer  Economic expert Munar Al-Obaidi confirmed that the exchange rate of the US dollar against the Iraqi dinar has witnessed a significant decline recently.
 
This decline is due to a group of intertwined economic and procedural factors,  which vary in their level of influence but have collectively contributed to strengthening the dinar.

Al-Obaidi told the Iraq Observer that “the reasons for the dollar’s decline include the   economic contraction and   declining consumer confidence.
 
The state of uncertainty in the Iraqi market, as a result of the economic slowdown, has  led to a decline in the confidence of individuals and institutions in spending, which has negatively impacted the volume of public demand, thus  reducing the need for the dollar as a stimulus for trade.
 
In addition, the halt in government investment spending has led to the government focusing on operational spending rather than investment spending, leading to a decline in economic activity.”  

He added that "the general budget is the primary driver of economic activity, and reducing investment spending has reduced aggregate demand,   including demand for the dollar." 

He noted that "other reasons include  :
     tightening controls at border crossings and
     government measures to  curb smuggling and  regulate relations with the Kurdistan Region, which have contributed to  reducing the phenomenon of inflated invoices,  which has reduced the unreal demand for dollars in the parallel market."
 
Regarding the shift of traders to the formal banking system, Al-Abidi explained that “the markets have witnessed the  entry of a large segment of traders into the formal banking system, and  their reliance on the official dollar exchange rate through approved platforms, which has  reduced the  volume of trading in the parallel market and  reduced pressure on the dollar, in addition to a  decline in re-export operations.
 
The decline in the re-export of goods to neighboring countries has led to a reduction in demand for imported goods, which has  directly reflected in a decline in the need for dollars to finance these commercial operations.” 

 He emphasized that   "settling major companies' dues in oil products instead of cash also had an impact on depreciating the dollar, as the government settled a portion of foreign companies' dues  in black oil and naphtha   instead of cash,   reducing reliance on dollars sold by the Central Bank and   increasing their supply in the market."  

He pointed out that “preparations for the electoral process also play a role.
 
With the start of the election season, the volume of    spending related to the electoral campaigns increased, and this spending is often financed from cash reserves stored in dollars,  which necessitated converting large amounts of them into dinars to cover campaign expenses,  thus increasing the supply of dollars and  increasing the number of foreign visitors and arrivals.

The increasing number of arrivals to Iraq contributed to the introduction of quantities of foreign currencies into the local market, which provided an additional source of hard currency   outside the framework of central bank sales, and  contributed to strengthening the availability of dollars.”  He continued, saying,
 
"The halt to illicit trade as a result of the closure of the border with Syria played  a significant role in the decline of the dollar.
 
The closure of border crossings with Syria contributed to the  reduction of smuggling and illegal trade, which had been heavily dependent on the dollar in the parallel market,  leading to a further decline in demand for the dollar."  

He concluded by saying, "The   decline in the issued currency and the withdrawal of a portion of it from the market  is another reason behind the decline in the dollar price.
 
The Central Bank of Iraq withdrew a portion of the dinar money supply from the market,  creating a double demand for the Iraqi dinar against the dollar.
 
This balance in demand levels between the two currencies helped boost the value of the dinar and  raise its exchange rate against the dollar on the parallel market."   https://observeriraq.net/بينها-الانكماش-الاقتصادي-خبير-يكشف-ال/