The cabinet’s decision, which took effect Wednesday, establishes a Finance Ministry purchase rate of 1,500 dinars per dollar, with commercial bank sales set at 1,510. This aggressive adjustment exceeds previous government projections, which had anticipated a range between 1,400 and 1,500. By devaluing the currency, Baghdad seeks to maximize the dinar value of its dollar-denominated oil earnings to help cover a projected budget deficit exceeding 40 trillion dinars.

Iraq remains heavily dependent on the Strait of Hormuz, where export volumes have struggled to recover. While southern shipments rose to 2.6 million barrels per day in late September, they remain far below the pre-war peak of 3.6 million. To maintain market share, the state marketer SOMO has offered steep discounts of up to $20.80 per barrel. While companies like Vitol have capitalized on these reduced prices, the resulting strain on national revenue has left the government with little choice but to weaken the currency, a move economists warn will inevitably drive up import costs and erode household purchasing power.