The Central Bank of Iraq stays on course with sound key policies that have buttressed the Iraqi Dinar through 2024. The central bank has huge foreign currency reserves, $115 billion, and continues to support the Dinar’s stability in the foreign exchange markets. Recent developments also point to Iraq’s keenness to boost its currency through sophisticated measures.
The CBI has well-built a strong position in foreign currency reserves with $115 billion of diversified actually held. As evident from the table above, this a substantial reserve base puts Iraq among the better position as regional economy and critical for the foreign value of the Iraqi Dinar.
The reserve portfolio is well-diversified across the dominant world currencies and gold, evidencing that the CBI has correctly diversified its risks and optimized its liquid assets management. The current distribution reflects a carefully considered approach to reserve management:
US Dollar Holdings (65% – $74.75 billion): The first position expressed in US dollars substantiates the fact that currency is used as the world’s leading reserve and as the main medium of payment for international oil contracts. It makes significant dollar position very crucial for Iraq’s trade operations and also help in controlling the flow of exchange rates between Dinar and dollar.
Euro Holdings (20% – $23 billion): Euro component appears to help diversify the trade, particularly with EU partners, as it is seen as an important element in the diversification search. This allocation is useful in managing currency risk concentration and aids in aligning international operations as Iraq sees itself expanding its economy with the European markets.
Gold Reserves (10% – $11.5 billion): It is an important instrument in protecting against fluctuations in currencies and political risks: gold stocks. To some extent, the CBI has, over time, strategically stock-piled gold as a way of more backing for the Dinar with more of a historically stable commodity. This allocation affords considerable safeguarding against the variability of foreign financial markets.
Other Currencies (5% – $5.75 billion): This diversified portion entails stocks in other major world currencies; it adds flexibility in regional transactions and portfolio risk diversification. These holdings consist of such currencies as British Pounds, Japanese Yen, or other currencies customary to that region.
The CBI’s reserve management strategy serves several critical functions in supporting the Iraqi Dinar and the broader economy:
Exchange Rate Support Mechanism: These big buffers leave the CBI with pretty strong instruments to pursue the stabilization of the exchange rates. The CBI should be allowed to continuously intervene in the market and to conduct auctions to maintain order in the exchange rate of the Dinar. This capability is particularly important to consider in Iraq now that the country heavily relies on imports and export of oil.
International Market Credibility: The strong reserve position give credibility to Iraq in the external financial market. These reserves are quality reserves and imply the import coverage ratio of approximately 08 months and prove that Iraq can fulfill all its international commitments along with stable trading partners. This credibility directly serves stability of the Dinar and assists in attracting international investments.
Trade Facilitation: The reserves also have a critical function within the Global South of ensuring a reliable access point for cross-border trading currencies. This function is more important with respect to export of oil and other basic goods and services so that the people of Iraq are confident of the Iraqi Dinar as a medium of exchange with out straining the establishing of other structures .
Emergency Response Capability: It affords a wide cushion to avert external risks and volatility as well as cushion systemic risks in a relatively stable manner. This emergency response capacity becomes highly visible during the recent Global market fluctuations when the CBI effectively defended the local currency against these global forces.
They act as those institutions that supervise the Money supply and its stability in one country. Since the major responsibilities of this position include relating the domestic currency to other currencies, it is referred to as exchange rate management.
Central banks employ various exchange rate regimes, each with its own set of objectives and challenges:
Aside from improving the facility in currency management the Central Bank of Iraq has been key in the overall transformation of Iraq’s digital banking platform. These are intended to enhance the development of financial services, enhance payment and increase economic inclusion.
Recent economic data supporting currency stability:
The banking sector shows significant improvement:
Progress in international financial integration includes:
The CBI has established key partnerships featuring:
Key legislative updates include:
New regulatory measures focus on:
Latest IMF forecasts for Iraq indicate:
The CBI has established key targets:
Iraq’s position compared to regional peers:
Comparative economic indicators:
Recent improvements include:
Strengthened oversight through:
Expected developments include:
Key focus areas for 2025 and beyond:
In the medium term, Iraq targets to deepen the digitalization of its financial markets, given the progress made by the advent of the Iraq National Payment System and services in digital wallets. The increase in digital banking will also mean that more consumers and businesses will be able to do more faster, and more securely. This change will assist in eliminating the usage of cash gradually, increasing financial inclusion, especially for the Circles, and developing appropriate conditions for various Fintech services such as mobile banking, the usage of the Internet for payments, and digital lending. Advanced digitization will also help to increase the level of efficiency and competition in the financial sphere.
2. Enhanced Regional Currency Integration
Over the medium term, one of the broad goals for Iraq’s economic development is the deeper linkages between the national currency and regional currencies. It could imply cooperation with other countries depending on the exchange rate policy, coordination and standardization of policies in bordering nations, among others, and the simplification of cross-border transactions through favorable trade policies. The circulation of regional currency emerged with an intention to cut down transactional costs, counteract the risk of currency fluctuation and support trade and investment in the region. Due to increased regional economic integration, Iraq would benefit from a more balanced economy and a stronger financial system, which should boost investor confidence and the dinar’s stability.
3. Improved Cross-Border Payment Systems
The improvement of cross-border payment systems in Iraq has the primary goal to facilitate international financial and economic transactions. The improvement results in related payment systems will improve Iraq’s capability of cross-border payment transactions, and it a cut its transaction costs more rapidly in foreign exchange and remittances. This is especially so for Iraq, since it is an open economy that participates in international commerce and through which individuals in the country’s diaspora send back remittances. Enhancing its cross-border payments will help Iraq advance toward a regional and international economy by establishing an attractive environment for foreign investments and enabling business individuals to perform efficient cross-border transactions.
4. Strengthened Monetary Policy Framework
The key factors effective in Iraq’s medium-term outlook include the formalization of the institutional structures of its monetary policy to promote monetary stability in the long run. On the part of the Central Bank of Iraq, there are plans to increase the level of complexity with regard to tools and techniques for fighting inflation, management of exchange, and interest rates. This action plan will require increasing understanding or observing the transparency and credibility of choices in monetary policy, expanding ways through which members of the public can be informed or educated about these policies, and designing ways through which the market can be influenced most effectively. For that reason, access to a stronger monetary policy framework will assist Iraq in absorbing external disequilibria, anchor inflation, preserve the value of the Iraqi dinar, and lay the foundation for a favorable environment for economic development and investment.
The Iraqi Dinar has stable fundamentals given by adequate foreign stocks, the development of the banking system and better integration into the international system. The measured approach that the CBI is taking towards monetary stability, in combination with ongoing financial liberalization, gives a stable base for the position of the Dinar on regional and international exchange markets. Today, there are some open issues, but stable foreign exchange reserves, the tendency to raise the GDP, and the further evolving banking sector guarantee the positive outlook of the Iraqi Dinar till 2024 and further on.
End
DINARIT is a worldwide Licensed financial Numismatic service offering currency exchange for Iraqi Dinar and other currency with lowest rates