Shafaq News – Baghdad

The US dollar has risen against the Iraqi dinar in local markets since the start of December, movements that do not affect overall price stability, a senior official told Shafaq News on Thursday.

Prime Minister’s financial and economic adviser Mudhhir Saleh said the Iraqi economy has maintained a low inflation rate of around 2.5% annually, attributing this to the interaction of three effective economic policies.

He explained that the first is monetary policy, which relies on a fixed official exchange rate for the Iraqi dinar against the dollar at 1,320 dinars per dollar, providing a stable nominal anchor for prices.

The second is fiscal policy, which applies broad-based subsidies amounting to nearly 13% of gross domestic product, helping cushion the transmission of price shocks to living standards, particularly for basic goods and services.

The third pillar, according to Saleh, is trade policy focused on price defense, pointing to the expansion of modern retail markets, such as hypermarkets, which act as a counterweight to exchange rate volatility by absorbing what he described as distorted information in the parallel market and neutralizing its impact on prices and consumption.

He stressed that the parallel exchange market no longer has a significant influence on daily living conditions, noting that it has effectively become detached from income and consumption levels, with its impact shifting instead to the asset sector, which is not directly linked to everyday economic stability.

Meanwhile, economists warned earlier that Iraq’s currency pressures are rooted in structural vulnerabilities, including heavy reliance on oil revenues, weak non-oil income, and long-standing fiscal and administrative challenges.

Read more: Dinar slides: Why Iraq’s oil billions aren’t buying currency stability