Iraq is witnessing renewed currency stress as Dollar Dinar Pressure increases across local exchange markets, reflecting deeper economic challenges linked to oil revenues, fiscal capacity, and foreign currency supply. Recent market movements underline growing concern among traders and policymakers about short-term stability.
In Al-Sulaimaniyah, currency exchange market representatives reported rising demand for US dollars during early January. As a result, exchange rates moved sharply higher within a short period. Market data shows the dollar already exceeded 148,000 dinars per $100, prompting expectations of further increases soon.
Jabbar Koran, spokesperson for the Al-Sulaimaniyah currency exchange market, said the dollar could reach 150,000 dinars per $100 if current conditions persist. He explained that limited dollar injections by the Central Bank continue to fuel demand pressure. Consequently, traders struggle to balance supply and demand.
At the same time, global oil prices have declined, creating additional strain on Iraq’s finances. Oil revenues remain the primary source of government income. Therefore, falling prices directly weaken the country’s ability to supply foreign currency to the market while domestic spending continues to rise.
Koran also pointed to structural limits on oil exports. Iraq cannot increase production freely due to OPEC+ output quotas. These restrictions prevent the country from compensating for lower prices through higher export volumes. As a result, foreign currency inflows remain constrained.
To address these pressures, Koran proposed investing surplus crude oil into refined products instead of exporting raw crude alone. He suggested converting oil into gasoline and gas products for regional markets. Neighboring countries such as Turkiye and Syria could offer steady demand for such exports.
However, Iraq faces capacity challenges in refining. The country operates a limited number of refineries, which restricts production expansion. Koran called for better use of existing facilities, particularly those located in the Kurdistan Region, to increase output efficiency and value-added exports.
Official data highlights the scale of Iraq’s dependence on oil. Federal budget figures show revenues exceeded 82 trillion dinars between January and August 2025. Oil revenues accounted for more than 73 trillion dinars, representing roughly 90 percent of total income. Non-oil revenues remained relatively small.
This imbalance exposes the economy to external shocks. When oil prices weaken, Dollar Dinar Pressure rises quickly across financial markets. Analysts warn that currency volatility will persist unless Iraq strengthens non-oil revenue sources and improves fiscal discipline.
Economists emphasize the need for coordinated monetary and fiscal responses. Targeted dollar injections, controlled spending growth, and investment in refining infrastructure could help stabilize exchange rates. Over time, diversification could reduce exposure to oil cycles.
Looking ahead, market participants expect continued volatility if reforms slow. Exchange rates may test higher levels during periods of uncertainty. Until broader structural changes take hold, Dollar Dinar Pressure will remain a defining challenge for Iraq’s economic outlook.
