Multiple forces drive Iraq’s dollar drop

Shafaq News/ The US dollar has dropped by 5,000 to 6,000 dinars on Iraq’s parallel market in recent weeks, breaking a months-long pattern of stability at around 150,000 dinars per $100.

Adviser to the Prime Minister for Financial Affairs, Mudhhir Muhammad Salih, told Shafaq News that the decline is partly driven by reduced demand for cash dollars. “The growing use of electronic payment cards, especially among travelers, is helping ease pressure on the parallel market,” he said.

Salih added that enhanced flexibility in foreign trade financing—particularly for the private sector—has also contributed. “Iraqi banks are now using correspondent banking at the official exchange rate of 1,320 dinars per dollar,” he explained. “This is supported by steady access to foreign currency, following the removal of the previous payment platform, and by the Central Bank’s new compliance-focused mechanisms.”

“These combined factors are shifting demand away from the informal market and toward more reliable, cost-effective alternatives,” he noted.

However, not all experts agree that the drop signals stronger monetary fundamentals.

Financial expert and former Central Bank official Mahmoud Dagher urged caution. “It’s too early to interpret this as improved domestic monetary performance,” he told Shafaq News. “The decline also reflects global volatility, including lingering effects from the trade war initiated under the Trump administration and the recent weakening of the US dollar.”

Banking specialist Mustafa Hantoush echoed that both internal and external factors are at play. “US-Iran negotiations have eased pressure on dollar demand, particularly for trade between the two countries,” he said.

Hantoush also pointed to recent policy measures that helped shift behavior. “Allocating $5,000 through MasterCard for small traders has encouraged digital payments,” he explained. “Likewise, the decision to distribute cash dollars to Hajj pilgrims—both by air and land—sent a positive message about Iraq’s dollar reserves.”

Economist Hilal Al-Taan credited the Central Bank of Iraq with playing a stabilizing role. “Monetary policy tools have gradually reduced the exchange rate gap,” he said, while warning that “continued regional instability could quickly reverse those gains.”