Central Bank of Iraq: Adjusting the exchange rate was the best solution to protect foreign reserves
Central Bank of Iraq: Adjusting the exchange rate was the best solution to protect foreign reserves
2026-10-13
Shafaq News – Erbil
The Director General of the Statistics and Research Department at the Central Bank of Iraq, Samir Fakhri Naama, described on Tuesday the decision to adjust the exchange rate of the US dollar against the dinar as the “ideal” solution to preserve the country’s foreign reserves and to confront the “shock” of declining revenues resulting from the crisis in the Strait of Hormuz and its surroundings, stressing that the impact of this adjustment on inflation remains much less than the consequences of devaluing the currency.
This came during his participation in the ninth dialogue session of the “Miri 2026” forum held in Erbil, which was entitled “The Dinar, the Dollar and Discipline: The Central Bank of Iraq in a Turbulent World”.
Naama said, “The issue of the exchange rate and its relative importance varies from one country to another. For Iraq, it is not just a local exchange of foreign currency, but because the Iraqi economy is rentier, it depends almost entirely on oil revenues, and its sources of income depend on external demand, which makes any external fluctuations directly affect it.”
He explained that “the most important equation that works in the Iraqi economy is that government spending depends on oil revenues in dinars issued by the Central Bank,” noting that “for every billion dollars exchanged at the approved exchange rate, for example (1300 dinars per dollar), the government is financed with 1.3 trillion dinars, but every dinar spent in the budget for operational spending returns again as a demand for dollars at the Central Bank.”
Naama added that “oil revenues constitute more than 93% of the state’s public revenues,” noting that “if this spending were directed towards investment aspects, it would contribute to the growth of the gross domestic product and reduce the demand for the Central Bank’s dinars, while the accumulated foreign reserves would be used to meet this operational spending through a sterilization strategy to withdraw the dinar in exchange for the dollar.”
The Central Bank official revealed the behind-the-scenes details of the recent crisis involving the adjustment of the exchange rate since October, explaining that “the Iraqi economy has been exposed to more than one positive and negative shock; in 2023 we witnessed a positive shock that led to an increase in revenues and the exchange rate was reduced at that time, while the negative shock represented by the Strait of Hormuz crisis in 2026 caused an oil production shock that directly put pressure on indicators and reserves.”
He pointed out that “given the difficulty and conditions of external borrowing, the effects of the crisis began to appear in May and June because the shock did not appear in February and March due to the sale of oil on credit, which later led to an almost complete halt in realized oil revenues, and caused great pressure on reserves.”
Naama continued, saying that “the government issues bonds financed by government banks, and if those banks are unable to dispose of them, the central bank intervenes to exchange the dinars,” stressing that “the central bank’s vaults are full of dinars, but they constitute a debt that must be countered by a dollar obligation or revenue.”
The Director General of Statistics and Research concluded by emphasizing that “the main challenge was how to maintain foreign reserves to keep the economy running and bring it to safety, which necessitated changing the exchange rate to counter the shock of financial revenues generated from oil,” stressing that “the impact of adjusting the exchange rate on the general level with regard to prices and inflation was much less than the consequences of a direct change if it had been made to the value of the currency.”
shafaq.com
