ERBIL, Kurdistan Region of Iraq – The parallel-market dollar rate is expected to "soon" move “very close” to the official exchange rate, Iraq’s deputy prime minister for economic affairs said Sunday, citing increased US cash shipments and government measures.

In late October, Iraqi Prime Minister Ali al-Zaidi said his government was seeking to increase US cash dollar shipments to as much as $2.5 billion to narrow the gap between the official and parallel-market exchange rates.

“The parallel market exchange rate will definitely fall and become very close to the official exchange rate. I stand by this statement,” Deputy Prime Minister for Economic Affairs Mohammed Ali Tamim said in an interview aired by state media.

He said the parallel-market rate would “soon” decline, pointing to the increased supply of physical US dollars and measures being taken by Baghdad and the Central Bank.

Iraq devalued its currency in early October, raising the official cash selling rate from 1,320 to 1,520 dinars per US dollar. The parallel-market rate subsequently climbed above 170,000 dinars per $100, compared with 163,000 dinars the previous night.

The move comes as the US-Iran war has disrupted Iraq’s oil exports, widening pressure on the government’s budget.

“Over these two months, the US government has made the decision to send $3 billion,” Tamim said. He added that the next shipment was scheduled to arrive on Monday and would exceed $500 million.

The US cash shipments are physical dollar deliveries tied to Iraq’s oil revenues, which are held in an account at the Federal Reserve Bank of New York. 

Washington reportedly halted a shipment worth about $500 million in April amid pressure on Baghdad to curb the activities of Iran-backed armed groups and prevent illicit financial flows. Shipments later resumed in stages, with a new delivery arriving in Iraq on September 30, following understandings reached between Zaidi and US officials, according to Iraqi government spokesperson Haider al-Aboudi.

Earlier in October, Zaidi said the parallel rate could have reached 152,000 dinars per $100 without “the current regional circumstances.” He added that the US Federal Reserve had raised concerns about supplying Iraq with large quantities of physical dollars.

He said those concerns stem from fears in Washington about “the possibility that part of the cash dollars would reach the [armed] factions and be used in prohibited activities.”

Washington has imposed sanctions and financial restrictions while pressing Baghdad to rein in Iran-aligned armed groups that have attacked US interests during the war.

Zaidi said shipments had been halted for months before his government took office on May 17. Following talks with Washington, deliveries resumed at around $140 million per month before increasing to $500 million.