Iraq devalues its currency as US war on Iran disrupts oil shipping routes

Iraq has devalued its currency, changing the official exchange rate from around 1,300 dinars to 1,500 dinars per US dollar.The Central Bank of Iraq said on Wednesday that the new rate had been approved by the Cabinet at a meeting the previous night to meet “the relevant financial, economic and monetary requirements”.The previous official rate was set in 2023.

However, the market rate used by exchange shops has consistently differed from the official rate, with the gap widening in recent months.The widening gap has been driven partly by the US-Iran war, which has at times spilled over into Iraq, and disruptions to shipping through the Strait of Hormuz.Iraq relies heavily on oil exports, most of which were shipped through the strait before the war.

Since the conflict began, the country has resorted to transporting oil overland through Syria for export, a more expensive and less efficient route.Before the devaluation was announced, the unofficial rate had climbed above 1,600 dinars per dollar.

Following the announcement, it rose further to more than 1,700 dinars.Under the new arrangement, the Finance Ministry will sell dollars at 1,500 dinars per dollar, while consumers buying dollars through banks will pay 1,520 dinars.