Shafaq News- Baghdad

The US dollar has climbed above 1,600 Iraqi dinars on Iraq's parallel market, about 21% above the official retail rate of 1,320, even as new shipments of US cash arrive to ease liquidity. Bankers and economists told Shafaq News the extra dollars alone are unlikely to close the gap while speculation, policy confusion and demand outside the banking system persist.

Iraq runs two exchange rates: an official one, at which the Central Bank of Iraq (CBI) sells dollars through banks for trade, travel and other approved needs, and a parallel street rate set by supply and demand. Traders on the parallel market quote prices per $100, and the rate passed 160,000 dinars on Monday.

Demand for dollars far exceeds supply, according to economist Ali Daadoush. He pointed to speculation and uncertainty, delays in official bank transfers, and rising demand to pay for imports from Iran. Much of the cash circulating on the parallel market, he said, starts as dollars sold at the official rate to Iraqis for travel, study and medical treatment, which are then resold locally, pushing the rate higher and making it more volatile.

Demand is also coming from travelers and from traders who prefer not to import through ASYCUDA, the electronic customs system Iraq uses to track imports, said economist Abdul Rahman al-Mashhadani, keeping steady pressure on the parallel rate.

New shipments can improve liquidity, but their effect on the parallel market depends on how quickly the dollars reach people with legitimate needs, said Nabil al-Abadi, managing director of the Union Bank of Iraq. “Narrowing the gap requires a stronger banking sector and easier access to foreign currency through official channels, so that fewer people turn to the street.”

The CBI's foreign reserves fell to $80.6 billion at the end of July 2026 from $97.4 billion at the end of 2025, a drop of about $16.8 billion, or 17.2%, in seven months, according to central bank data.

On September 19, the CBI said its reserves remained sufficient to finance foreign trade, settle bank-card payments and supply cash dollars to travelers at the official rate. It blamed the parallel market rise on speculation, market expectations and the exploitation of regional tensions.

Al-Mashhadani said that conflicting statements from members of parliament are adding to the uncertainty. “One member of parliament's finance committee has said the rate is fixed at 1,500 dinars per dollar, another has spoken of changing the currency, and a third of removing zeros from it,” he said, adding that none of these matters falls within lawmakers' powers, and with the market reacting quickly to any such talk, it was no surprise to see the dollar break 1,600.

In the Kurdistan Region, Jabar Goran, spokesman for Al-Sulaymaniyah's currency exchange market, likewise said decisions on the rate rest solely with the CBI. He warned of a backlash if the government set the rate at 1,500 dinars per dollar in the federal budget, though he did not expect it to do so. "The reaction of citizens and the market would be very negative," he told a press conference.

Expectations have become a force of their own. Fears of a stronger dollar push traders and individuals to buy in anticipation of further gains, adding to demand and widening the gap. Additional cash may ease pressure in the short term, bankers and economists say, but it is unlikely to hold the rate.

Read more: Experts: Iraq dollar gap reflects limited dollar access