Iraqi Central Bank Explains Exchange Rate Decision as Bitter Choice

The Central Bank of Iraq clarified on Wednesday the core drivers behind adjusting the dollar exchange rate against the Iraqi dinar, pointing out that buying foreign currency via the parallel market aims at importing unregulated goods outside official customs procedures. Director of the bank's media office, Haidar Ghazi, stated in televised remarks that the exceptional circumstances confronting Iraq—including the closure of the Strait of Hormuz and declining oil exports leading to reduced revenues—compelled the state to reconsider its approach. The government had previously relied on discounting remittances from the Central Bank, accumulating heavy public debts, which prompted a surgical procedure to safeguard the state and political system through emergency hedging to sustain budgetary and financing obligations. Ghazi acknowledged that the decision was taken rapidly and felt like "drinking bitterness," emphasizing that while complications are anticipated, its repercussions remain far less damaging than allowing the previous crisis to persist unchecked. He further noted that domestic manufacturing had stagnated due to cheap competing foreign imports, stressing that this shift will stimulate domestic production, enhance local raw materials, and boost reliance on national industry over foreign goods. The official attributed the exchange rate disparity between official and parallel markets to legitimate versus illicit trade operations, explaining that unapproved purchases seek to evade customs duties and quality inspections, while the government intensifies border control efforts. He concluded by noting that Parliament is addressing the matter and plans to host both the Central Bank Governor and the Minister of Finance.