Iraq's Finance Ministry: dinar devaluation was the right choice

Shafaq News/ The devaluation of the Iraqi dinar was opted to boost the domestic product, protect the Central Bank's reserves of hard currency, and bolster the budget, Iraq's Ministry of Finance said in a statement on Sunday.

The statements said that the stifling financial crisis that struck the country impeded the state's capacity to accommodate the inflated expenditure rate and growing salary invoice amid a stagnant oil market and perilous public health situation.

The Ministry said that the budget mediates the need for a rational financial administration and a safety net for the vulnerable groups.

"The Ministry's policy was endorsed by the International Monetary Fund and the World Bank, who both admitted the hardships of current financial situation," the statement said.

Earlier in October, the Ministry said that the devaluation halted the freefall of the national reserve of foreign currency and boosted the importation capacity.

In December, 2020, Iraq's central bank increased the sale price of U.S. dollars to banks and currency exchanges to 1,460 dinars, from 1,182 dinars, seeking to compensate for a decline in oil revenue due to low crude prices.

The central bank of Iraq said the key reason behind the dinar's devaluation was to close the gap of widened 2021 budget inflation after a collapse in global oil prices, a major source of Iraq's financial resources.

The devaluation decision came as a preemptive move to prevent "draining Iraq's foreign reserves" and help government to secure public servants' salaries.

But in Iraq's largely dollar-denominated economy, lowering the value of its dinar by a significant rate, which was the highest devaluation rate since 2003, immediately raised the price of goods, hitting living standards.