Dinar Devalues ​​Central Bank of Iraq with 22% amid public outrage

The Central Bank of Iraq announced Saturday that it has reduced Iraqi diners by more than 20 percent in response to a real liquidity crisis brought on by low oil prices, a measure that has boosted public momentum as the government pushes. struggle to pay expenses.

Police in riot gear stormed a rally on Friday, removing hundreds of protesters by truck. Baghdad’s central bank announced in the incident that news of the decline had sparked protests. A released version of the state budget law for 2021 caused fur on Iraqi street last week while confirming plans to reduce the dinar.

The new levels represent a significant reduction from the previous official level of 1,182 IQD. This is the first reduction in exchange rates made by the Iraqi government in decades.

In a statement, the Central Bank set the new rate for the dinar, which is crushed to the US dollar, at 1,450 IQD when it sold to the Iraqi Ministry of Finance. The dinar will be sold to the public at 1,470 IQD and to other banks at 1,460 IQD.

The downturn raised expectations that the dinar would weaken further down the street. The rate has already risen to 1,400 IQD per US dollar on Saturday, up from 1,300 IQD last week, at currency exchange representatives.

“I stopped exchanging money,” said Abo Abed, who works at a currency exchange in the capital’s Karrada district. He turned away a buyer with a $ 100 bill, saying he could only sell at the old 1,300 IQD level. “Who knows, tomorrow it could be 1,800 IQD. ”

Since the fall in oil prices earlier this year, Iraq has been embroiled in an unprecedented liquidity crisis. The country had to borrow raw exports from the bank’s dollar reserves to pay out nearly $ 5 billion in monthly taxes for public salaries and pensions. Oil revenues, which make up 90% of the budget, have averaged $ 3.5 billion.

Efforts to introduce reforms have been met and so far, the government has been borrowing in-house to introduce state bills.

A further downturn in Iraq, which will include almost all of its goods, would allow emergency payments to be made. But setting a new standard has been a delicate balancing act to meet the government’s liquidity needs without affecting average Iraq.

The Ministry of Finance is responsible for distributing salary payments to public workers, Iraq’s largest labor force and among those most disadvantaged by the new monetary measures.

The bank justified the decline, saying it was the result of “intense discussions” with the prime minister, finance minister and lawyers, and insisted that the fall in the value of the dinar would be a one-off event. hour.

“It must be confirmed here that this change (reduction) in the value of Iraqi diners will be one-time only and will not be repeated,” the statement said. “The Central Bank will protect this price and its stability with the support of its foreign resources,” he maintained at stable levels.

The bank has blamed bad economic policies over the last decade. They said they had “no choice but to intervene” as poor economic planning and fiscal policies by Iraqi politicians have reduced Iraq to an exporting state with the majority of state spending going up. to pay a flourishing public sector.

The decline attracted the value of public sector workers. Many fear that a weak dinar, in addition to plans proposed in the budget to cut wages and raise taxes, will cut cuts.

While taking a step toward austerity, the proposed state budget for 2021 also calls for spending to exceed nearly $ 40 billion. A Cabinet session to vote on the law has been postponed until Sunday.

From there, lawmakers will vote on, a challenging action as the cuts are deemed to be very unethical ahead of next year’s national elections.

“It will be very difficult (to pass),” said lawyer Sarkawt Shamseddine. “To get MPs to vote for this big bill, the government needs to show that they have other plans … to increase revenue. That’s the strategy. ”

Prime Minister Mustafa al-Kadhimi called for early elections to be held a year earlier than expected on June 20, according to anti-government protesters’ demands.