ERBIL, Kurdistan Region of Iraq - Iraq’s Council of Ministers on Tuesday amended the exchange rate of the dinar to the US dollar, setting 1,500 Iraqi dinars for each dollar as the purchasing price from the finance ministry, 1,510 for the selling price to banks, and 1,520 for sale by banks and non-bank private financial institutions.

The Central Bank of Iraq (CBI) had previously pegged the dinar at a value of 1,320 to the US dollar, though a widening discrepancy has emerged between the official value and the rate at which the dollar has been traded in the parallel market for years.

At the time of writing this article, a dollar is exchanged for around 1,630 dinars in Iraq’s currency exchange market.

Following a Council of Ministers session on Tuesday, it was decided that the exchange rate would be amended to 1,500 Iraqi dinars for each dollar as the purchasing price from the finance ministry, 1,510 for the selling price to banks, and 1,520 for sale by banks and non-bank financial institutions, with the move coming into effect from Wednesday.

The reevaluation comes as authorities move the dinar closer to its market value to narrow the gap. The current rate is the lowest the Iraqi dinar has been since November 2023.

Subsequently, on Wednesday, exchange offices in Erbil showd the exchange rate for each $100 surging to over 170,000 dinars - the highest in two and a half years, according to The New Region's correspondent.

A weaker dinar raises the cost of imported goods, including food, medicine and consumer products, putting additional pressure on Iraqi households already grappling with rising living costs.

The Iraqi dinar initially fell during the onset of the Iran war, but then stabilized as Prime Minister Ali al-Zaidi’s government was elected. Since then, it has continued to gradually depreciate in value.

Another primary factor for the loss in value has been Baghdad’s inability to sell the same quantities of its oil as before the US-Iran war, which started in late February. Almost all of Iraq’s oil transited the Strait of Hormuz, which Iran has shut, forcing the country to sell its oil at a discounted price.