The Ministry of Finance answers questions about the reasons for the change in the exchange rate of the dinar against the dollar

24 Q&A about the change in the exchange rate between the Iraqi dinar and the US dollar
Defining the exchange rate?

The exchange rate is the price at which the Iraqi dinar is bought and sold against foreign currencies.

 It is mostly set in relation to the dollar
American.

- The importance of the exchange rate?

The exchange rate determines the price of a variety of goods and services that are traded internationally. Most of Iraq's imports and exports are identified
In US dollars.

 Thus a change in the exchange rate determines the price of these goods and services in the domestic market

- Who sets the exchange rate?

The exchange rate is formally determined in Iraq as a result of an agreed price for the price at which the Ministry of Finance sells dollars, as a result of Iraqi oil sales.
Mostly, to the Central Bank of Iraq, in exchange for an Iraqi dinar.

 This is the so-called official rate. Then the central bank offers to sell
Dollars to licensed Iraqi banks and financial institutions at his regular auctions. 

This is the central bank rate.

 The third rate is a rate
The exchange of the Iraqi dinar to the dollar and vice versa in transactions opened outside the Central Bank auction. This is the market price. 

This is the rate
Which is used by most members of the public in the foreign exchange market.

- current situation ?

The official price was set at 1182 Iraqi dinars per dollar for a number of years. The market price fluctuated during this period between 1200 to
1270 Iraqi dinars to one dollar.

As a result of recent decisions issued by the Ministry of Finance and the Central Bank, the official price has now been set at 1450 Iraqi dinars each
US dollars.

- Reasons for changing the exchange rate?

There were many reasons for the rate change. First, there was a feeling that the Iraqi dinar was at a high price compared to the dollar.

The high price of the Iraqi dinar encourages imports, foreign investment and tourism decline, and it encourages capital outflows. 

Tends
The economy is towards trade and retail and away from the productive sectors. Second, as the Iraqi dinar appreciates, the economy becomes smaller
Control of imports. 

Third, competitive in general, and the Iraqi market becomes underneath. The rise in the value of the Iraqi dinar in general does not encourage investment
In the sectors that Iraq wishes to develop. For example, agriculture, tourism, manufacturing and services. 

Fourth, adjusting the value of the dinar
The Iraqi dinar helps increase the value of the dinar from our oil revenues and reduces the budget deficit.

 But the timing of the exchange rate change is now linked
Organically, the sharp decline in the state’s oil revenues and the price of the dinar should reflect this reality.

What are the implications for the exchange rate?

Most of the people will not be directly affected by the exchange rate adjustment. The dinar in their pockets or in their bank accounts will not suddenly lose its value.

It will make imported products generally but not necessarily more expensive, but only for a short period, as the new price is set.

 at
At the same time, the adjustment should lead to an expansion of the range of domestically produced goods and services, which will become more competitive price change
The spending will contribute to reducing the budget deficit and help the state fulfill its obligations towards paying salaries and retirement and support vulnerable groups in the country
the society.



Who are the beneficiaries or affected by the exchange rate?
As the economy adapts to the new competitive exchange rate, more activities and investments will translate into more and better job opportunities for our people.


The revenues of Iraqi product exporters will increase in Iraqi dinars, as will the Iraqi product in the face of imported goods and all these consequences
Positivity will contribute to creating good job opportunities
People who travel more abroad will find their overseas visits more expensive.

 People who consume a great deal of
Imported products will find their purchases more expensive in Iraqi dinars.

 People who regularly transfer money abroad will find it is their dinars
He is now buying dollars less.

How to stabilize the exchange rate after the change?

The central bank and the Ministry of Finance will fully support major financial institutions in the new exchange rate. 

We expect a quick return to stability
The exchange rate around the new exchange rate. Fiscal and monetary reforms will fuel the central bank’s reserves as they will improve the budget
Payments.

Oil economy. Why should the exchange rate matter?

We have to plan beyond the oil economy.

 The international economy is changing rapidly and the energy mix of global demand is shifting towards less dependence over the term
Long term on fossil fuels. We must plan to diversify our economy if young people and future generations want to find a decent job and secure income. 

Help us
Adjust the exchange rate in this direction.

What is the effect of changing the exchange rate on citizens when traveling?

This depends on where you are traveling to. Neighboring countries such as Iran, Turkey, Egypt and Lebanon have witnessed a decline in their currencies against the dinar
Iraqi officials, therefore travelers there are unlikely to be affected. 

Travelers may see it to Europe, North America and other developed countries
Their high travel costs,

- How to obtain foreign currency upon request?
Yeah. 

The Central Bank will continue to ensure that all necessary foreign currencies are available whenever and wherever they are needed, including at banks
And banking houses.

 The market will always be adequately supplied in foreign currencies at the prevailing rates.
How will importers be affected by the change in the exchange rate?

It depends on which countries you are importing from and which products. 

If it is from neighboring countries like Turkey and Iran whose currency has depreciated dramatically
Against the Iraqi dinar in the past few years, it is unlikely to lead to significant increases in the prices of its exports.

 If it is
Other currencies, the exchange rate difference may be absorbed fully or partially by the issuer.

What is the effect of the exchange rate on new professionals when they enter new projects?



The exchange rate should not affect you directly. If you plan to manufacture or process a product that competes with imports, it should be a price adjustment
The exchange is in your favor. 

Likewise if you work in the agriculture, tourism or service sector.

What is the effect of the exchange rate on low-income people?

The government will take measures to offset the negative consequences of the exchange rate adjustment on the poor. 

We have increased social welfare benefits in
The budget to compensate for the possible rise in the prices of some imported goods. 

Changing the exchange rate will help in drawing a more sustainable budget and gives
The government has more resources to support the low-income segment.

- What is the mechanism for the citizen to keep his income?

If you keep your savings in US dollars, adjusting the exchange rate will improve the value of your savings in Iraqi dinars.

 If you keep your savings
In Iraqi dinars, you will earn a higher return on it if you keep your savings in banks or financial institutions
What is the effect of the exchange rate on the prices of imported goods?

Some imported commodity prices will rise at once to compensate for the exchange rate adjustments.

 The exchange rate adjustment should encourage the growth of alternatives
In a timely manner, this will lead to price stability. 

The central bank will use all facilities for the purpose of maintaining
Price stability
What about banks and exchange companies?

The Iraqi banking sector is subject to close supervision by the Central Bank, which ensures the stability of the system. 

The exchange rate adjustment will not affect
Bank operations and exchange centers. 

The Iraqi banking sector has few foreign loans and thus will not suffer any negative consequences from
Adjustment. Most financial institutions have positive net dollar assets.

- IMF support for the proposal to change the exchange rate?

The exchange rate adjustment is an economic and financial decision with an all-Iraqi leadership and an important part of the reform package that we have embarked on in the 2021 budget.

We have gained international support for the plan, and it is an important part of the government reform program. 

Iraq continues to engage with the International Monetary Fund
And other international agencies in the process of planning our economic development and promoting the reform program.

- The philosophy of adjusting the exchange rate?

The government believes that Iraq should diversify its economy away from dependence on oil, especially as the world is moving towards alternatives to fossil fuels as part of
Growing components of its energy.

 A very important part of this diversification is increasing the competitiveness of the Iraqi economy and this cannot be done if it is done
Our currency is constantly overvalued. Affordable currency is essential for a competitive economy
What is the impact on retired pensions?

Pension levels will not be affected in any way as they are specified in Iraqi dinars.

 However, Iraqi retirees may find
Living abroad their pensions in some countries of their residence whose purchasing power has changed. This mostly applies to retirees



Who live in Western countries, the Gulf, and Jordan. Iraqi retirees who lived in Egypt, Turkey, Lebanon or Iran had been
They have already seen a huge rise in their domestic purchasing power in the past few years, as these currencies have declined dramatically in the face of
The Iraqi dinar.

Rents and contracts?

Most of the contracts in Iraq with a relatively low value are expressed in Iraqi dinars, so they will not be affected by changing the exchange rate. 

Often done
Significant value contracts are expressed in USD, so they may need to be adjusted to reflect a higher value of USD in dinars.

Iraqi, but this must be agreed upon by the contracting parties.

- Debts?

Most bank loans are expressed in Iraqi dinars, so adjustments will not be required.

 You may need cross-border debt contracts

The value of the US dollar in Iraqi dinars has to be modified to reflect the increase in the value of the US dollar in Iraqi dinars, but this must be agreed upon between the parties.
Contract.

What about the reserves of the central bank?

The reserves maintained by the CBI are strong and fully capable of absorbing any additional foreign exchange demands. 

No drop
Short-term reserves will be compensated for by increasing internal investment flows and reducing import demand as a result of the price adjustment
Exchange.

What about the future?

Iraq is going through tough economic times, but we must plan to create the foundations for a new economy. This will take some time but we are sure
We achieve a more balanced and better economy for our people, especially our youth.

 We o have production in the near future. Such an economy will create more jobs
An important part of this strategic direction is the competitive exchange rate, and this is what our adjustments are aimed at


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