Shafaq News deciphers the “code” of the biggest threat to the Iraqi dinar

The Iraqi citizen may not directly feel the rise or fall of the Central Bank’s foreign currency reserves, but he feels its effects in the dollar exchange rate, commodity prices, the purchasing power of the dinar, and even in the state’s ability to cope with economic crises. Arabs& Middle Easterners

Foreign reserves are considered the “first line of defense” for the Iraqi economy, as they give the central bank the ability to protect the dinar’s exchange rate, finance import operations, and maintain confidence in the financial sector, especially in a country that depends almost entirely on oil revenues.

In recent years, the reserve has recorded a gradual decline, as it decreased from $111.6 billion at the end of 2023 to $100.2 billion in 2024, then to $97.4 billion at the end of 2025, before settling at $97.8 billion at the end of April 2026. Despite this decline, experts confirm that the reserve is still at safe levels, but it remains dependent on oil prices and the state’s financial management.

In this regard, the Prime Minister’s financial advisor, Mazhar Muhammad Saleh, said that the Central Bank’s reserves are still within reassuring limits according to international standards, as they cover Iraq’s imports for about 12 months, while the global standard is only three months.

Saleh confirmed to Shafaq News Agency that these levels give the Central Bank significant ability to intervene in the exchange market and maintain the stability of the dinar, explaining that the size of the reserves is one of the most important indicators of the strength of monetary policy. He pointed out that exchange rate stability does not depend on reserves alone, but is also linked to oil prices, government revenues, the efficiency of the banking sector, and the level of confidence in the economy.

For his part, economist Mohammed Al-Hassani believes that the central bank’s reserves are primarily fueled by oil revenues, while non-oil revenues remain of limited impact.

Al-Hassani told Shafaq News Agency that the Central Bank does not use these funds to finance the budget, but rather to maintain monetary stability, support the dinar’s exchange rate, secure the necessary dollars for imports, and bolster investor confidence in the Iraqi economy. He noted that a portion of the reserves is invested in safe and highly liquid financial instruments with international institutions, thus preserving their value and ensuring their availability when needed.

Mahmoud Dagher, the former general manager of the Central Bank, believes that the impact of the reserve on the citizen is indirect, explaining that its real impact appears when speculation on the dollar increases or confidence in the market declines.

Dagher told Shafaq News Agency that news and rumors about the economy or oil exports are driving some citizens and merchants to buy dollars, increasing demand and driving up its price on the parallel market. Since Iraq relies heavily on imports, any rise in the dollar’s value inevitably leads to higher prices for imported goods and a decline in the dinar’s purchasing power, according to Dagher.

For his part, Najm Abdul Tarish, a professor of political science at Dhi Qar University, pointed out that the continued decline in oil prices to levels ranging between $55 and $60 per barrel may put pressure on reserves, if it coincides with continued high government spending.

Abdul Tarish explained that the reserves will not decline sharply in the near term, but they could gradually erode if oil revenues continue to fall without genuine economic reforms. He stated that protecting the reserves cannot be achieved by relying solely on oil, but rather through economic diversification, increasing non-oil revenues, and encouraging investment and domestic production.

What does this mean for the citizen?

According to experts, keeping the reserves at their current levels reassures the markets and strengthens the stability of the dinar’s exchange rate, while a prolonged decline in reserves could reduce the central bank’s ability to intervene, negatively impacting the prices of the dollar and imported goods.

Thus, the central bank’s reserves are not just a number in financial reports, but one of the most important guarantees for the stability of the Iraqi economy, and largely determine the state’s ability to protect the dinar, confront crises, and maintain the purchasing power of citizens.

Shafaq.com