Reasons Behind CBI’s Delay of Iraqi Dinar Revaluation

For years, talk of an Iraqi dinar (IQD) revaluation has stirred speculation among investors both inside and outside Iraq. With a nominally low exchange rate and rumors of a sudden currency surge, many watch the Central Bank of Iraq (CBI) for signs of movement. Yet despite the anticipation, the CBI has held firm in its approach, taking measured steps instead of rapid shifts.

So, why hasn’t the dinar revalued yet?

The reasons are more nuanced than most discussions suggest. Behind the delay lies a combination of internal monetary policy decisions, political constraints, global economic oversight, and technical limitations. Far from being a case of negligence or conspiracy, the CBI’s restraint is shaped by efforts to ensure long-term monetary stability and economic reform.

Internal Monetary Policy Challenges

The CBI’s mandate is clear: safeguard price stability and control inflation. Contrary to the expectations of speculative circles, orchestrating a massive spike in currency value is not the primary goal of most central banks. Here’s how that applies to the dinar:

• Fixed Exchange Rate Regime: Iraq operates a fixed exchange rate system where 1 USD equals approximately 1,309 IQD. This peg helps stabilize domestic prices and protect against inflation, especially important for a country that relies heavily on imports. A sudden revaluation would disrupt this balance, potentially increasing inflation and creating confusion in pricing across the economy.
• Heavy Dollar Dependency: Over 90% of Iraq’s government revenues come from oil exports, which are priced and settled in U.S. dollars. This dependency makes dollar liquidity critical for funding public services, paying foreign debt, and stabilizing imports. Revaluing the dinar could limit access to essential USD reserves, destabilizing the country’s financial system.
• Focus on Digital Currency Reform: The CBI has made it clear that the modernization of Iraq’s financial system is a priority. Its focus on introducing a digital dinar aims to reduce reliance on cash, close the gap between official and parallel market exchange rates, and improve payment efficiency. This ambitious reform requires significant infrastructure upgrades, leaving little room for distraction with speculative revaluation.

Political Interference and Instability

Even the most well-crafted monetary policy struggles to gain traction without political support and security. Iraq’s internal political dynamics have repeatedly slowed progress.

• U.S. Sanctions and Dollar Access: In recent years, the U.S. Treasury has sanctioned several Iraqi banks for allegedly facilitating illicit dollar transfers to sanctioned entities in Iran and Syria. In response, the CBI had to tighten dollar outflows and increase compliance oversight—an action that absorbs resources and complicates broader reforms, including any steps toward revaluation.
• Power Struggles Within Government: Competing interests in Iraq’s fragmented political system often prioritize short-term populist spending (like salary increases) over long-term monetary discipline. This undermines the CBI’s independence and can delay implementation of strategic reforms needed to stabilize and eventually strengthen the dinar.
• Regional Currency Pressures: Neighboring countries like Iran and Türkiye have experienced sharp currency depreciation, with Iran’s rial losing around 20% of its value in 2024. Iraq must be cautious not to become a target for speculative attacks or disrupt regional trade relationships through sudden exchange rate shifts.

IMF and International Oversight Concerns

The International Monetary Fund (IMF) and other global institutions have long advised Iraq to address structural economic weaknesses before attempting major currency moves.

• Fiscal Deficit: Iraq’s 2023 budget deficit reached 7.6% of GDP, driven largely by high public sector spending. The IMF has cautioned that unless Iraq reins in its expenditures and diversifies its revenue streams, it risks inflation and further currency instability—two factors that directly oppose the logic of a revaluation.
• Corruption and Transparency Issues: According to estimates, $62 billion in remittances exited Iraq through opaque banking channels in 2024 alone. These numbers raised red flags among global regulators, prompting the CBI to intensify anti-money laundering (AML) and counter-terrorism financing (CFT) efforts. Until full compliance with global standards is achieved, the path to revaluation remains politically and diplomatically complicated.
• Dependence on Oil: A strong dinar must be backed by a strong and diversified economy. While Iraq is rich in oil, non-oil sectors like agriculture, industry, and tourism have seen slower growth, just 2.3% in 2024. Without economic diversification, any currency appreciation would be difficult to sustain.

Technical Readiness of Iraq’s Banking System

Modernizing Iraq’s banking sector is essential for any currency overhaul to succeed. As of now, significant gaps remain:

• Limited Financial Inclusion: Only about 30% of Iraq’s adult population holds a bank account, and most transactions are still conducted in cash. This reliance on physical currency hinders the kind of transparency and traceability needed for modern monetary policy, including currency revaluation.
• Compliance and Governance Gaps: In 2024, the CBI barred eight domestic banks from participating in dollar transactions due to allegations of fraud and poor compliance. This underscores the need for stronger oversight and internal controls before the system can handle the complexities of a stronger or revalued currency.
• Ongoing Digital Transition: The CBI’s plan to introduce a digital dinar is a forward-looking initiative. However, the full implementation will take time. Experts suggest the infrastructure needed for wide-scale adoption likely won’t be ready before late 2025 or beyond. Only once the digital and physical frameworks are aligned can any revaluation move forward effectively.

Is Delay Strategic or Avoidance?

For those closely watching the IQD, it’s fair to ask: Is the CBI avoiding revaluation or strategically delaying it?

The evidence points toward a carefully calculated, strategic delay. Quick revaluation in unstable environments has often led to black market surges, inflation spikes, or public distrust, as seen in other countries’ histories. The CBI seems determined to avoid such pitfalls by first strengthening Iraq’s economic and banking foundations.

Additionally, recent moves, such as consultations with international financial advisory firms like Oliver Wyman, indicate a deliberate effort to improve transparency, governance, and monetary discipline. These are all long-term prerequisites for meaningful currency appreciation.

Final Word:

The delay in revaluing the Iraqi dinar isn’t about hidden agendas or secret timelines—it’s a reflection of complex realities on the ground. The Central Bank of Iraq is focused on long-term stability, gradual reform, and building the right financial infrastructure before making any major currency moves.

Still, this doesn’t mean investors are at a disadvantage.

Buyers of the Iraqi dinar are not in any immediate danger—owning the currency poses no harm as long as expectations are realistic. Those who understand that this is a long-term play rather than a quick-profit scheme may find themselves better positioned when reforms eventually align.

Iraq continues to make progress in key areas: banking modernization, international partnerships, regulatory upgrades, and digital currency development. These are foundational steps—ones that may not generate instant headlines but are quietly preparing the stage for a stronger, more credible dinar over time.

So while the journey may be longer than some had hoped, it’s not a dead end. The key is patience, awareness, and strategy.