Iraq faces revenue crisis as dinar devaluation debate intensifies

Iraq is confronting a severe fiscal pressure driven by lower oil prices, an economic slowdown and the disruption of exports through the Strait of Hormuz, with a previously drafted budget projecting an annual deficit of roughly 24 trillion dinars. Under Prime Minister Mohammed Shia' al-Sudani's government, officials have been weighing fiscal and monetary tools to close the gap, with intervention in the central bank's exchange rate seen as the highest-risk option. Analysts cited in the report say moving the dollar rate from 1,320 dinars to a band of 1,600-1,700 dinars would help cover the deficit but trigger roughly 25 percent currency-driven inflation, raising import prices and squeezing fixed-income public servants. The report also notes that despite new dinar printing and monetary expansion, about 25 trillion dinars has moved abroad, leaving dinar liquidity in the domestic market thin. As alternatives to a sharp devaluation, it lists budget discipline, state asset sales, improved tax collection, additional banknote issuance, Islamic finance-backed investment support, a 5 percent salary deduction paired with government borrowing, and an acceleration of crude oil exports through Turkey.