Lawmakers raise no-confidence threat as parties trade blame over devaluation

BAGHDAD — The devaluation of the dinar has drawn condemnation from across the governing alliance, with a State of Law lawmaker warning of a no-confidence vote, the Badr bloc moving to summon the Central Bank governor, and Hikma saying the decision came from the Coordination Framework itself, as officials give conflicting accounts of who proposed it.

Since Wednesday, the Central Bank buys dollars from the Finance Ministry at 1,500 dinars, sells them to banks at 1,510 and sets the price to the public at 1,520, up from 1,300, 1,310 and 1,320, making the dollar about 15% more expensive at the official rate. On the parallel market, where most retail prices are set, $100 was already selling for 160,500 dinars on Tuesday, above the new official rate. Following the official rate hike, it passed 170,000 in Baghdad on Wednesday, 179,000 in Basra and 180,000 in Erbil.

Every account of the decision points somewhere else. “The decision to change the exchange rate came from the Coordination Framework,” Hikma Movement member Ali al-Jourani told Al-Rabiaa TV, saying it was approved by bloc leaders and the State Administration Coalition. The government faced a choice between cutting public salaries and adjusting the rate, he said, and the Central Bank governor had raised the possibility of salary reductions given the uncertainty over oil exports; the government told the Framework it could cover spending until the end of the year if the war did not resume. The cabinet document described the change as an emergency proposal from the finance minister and the Central Bank governor, said Hussein Mounis, head of the Hoquq bloc. The Central Bank said it acted “based on the recommendation of the Council of Ministers.” Its media director, Haider Ghazi, said proposals had gone as high as 1,900 dinars and that the bank had insisted on 1,500. “Although the Central Bank holds the legal authority to make the decision, we accepted responsibility despite being the party most affected by the repercussions,” he said. Jourani said exchange rate policy was the Central Bank’s responsibility, and that the finance minister, who belongs to Hikma, had presented figures showing a deficit of more than 42 trillion dinars.

Most lawmakers were not told. “Most lawmakers knew nothing about this,” said Falah al-Khafaji of the State of Law Coalition, adding that the finance minister had told parliament’s Finance Committee the day before that there was no immediate intention to change the rate. Sadiqoun lawmaker Safaa al-Jabiri said that same Tuesday that a 1,500 rate had been proposed but that “there is no final decision so far.” “They raised taxes, customs duties, petroleum product prices and now the dollar. Where do they want to take us?” Khafaji said. “The decision came without any measures to protect the middle and poorer classes in society. If this continues, voices in parliament will grow louder and move toward withdrawing confidence from the government.” Parliament would seek to question the finance minister and the Central Bank governor, he said, and possibly the prime minister. “The exchange rate issue is a collective responsibility involving the Coordination Framework, political bloc leaders and the finance minister,” he said.

The Badr bloc “categorically condemns” decisions that increase pressure on citizens, its head, Mahdi Taqi al-Amirli, said, calling on the government to reconsider and announcing plans to question the Central Bank governor. Parliament “will not stand idly by,” he said, arguing that any change should follow an assessment of its social effects and come with measures to protect consumers and prevent exploitation. Mounis urged lawmakers to challenge it through the budget. “This raises questions about how seriously the decision and its consequences were studied, in addition to sidelining parliament on an issue that directly affects citizens,” he said. “The dollars we need must be generated inside Iraq by developing the private sector, gradually transferring employees from the public sector to the private sector, and increasing production and exports.” Lawmaker Ibtisam al-Hilali said the rate should have been 1,400 or lower to protect food prices, and Miqdad al-Khafaji called for an emergency session to force a reversal.

The Iraqi Communist Party said the move “exposes the bankruptcy of the quota-based, rentier system,” with deputy secretary Bassam Muhi accusing the government of “addressing the deficit from people’s pockets rather than from the sources of waste and corruption.” Hikma said it did not oppose a change in principle but objected to how it was carried out, criticising the absence of government outlets where citizens could buy dollars.

The alternative on the table was paying salaries less often. Prime Minister Ali al-Zaidi rejected a proposal to pay public employees every 45 days instead of monthly, said Finance Committee member Youssef al-Kilabi. “Salaries are being secured with difficulty,” he said, adding that the government had injected $100 million into the market. The Central Bank’s Ghazi said the government had repeatedly asked the bank to fund salaries for more than 9 million people on the state payroll by discounting treasury transfers, “until we found ourselves facing a crisis and depletion of our balances.” The bank said on Wednesday that its reserves were adequate “to meet all monetary requirements,” and Finance Committee member Ikhlas al-Dulaimi said on Tuesday that salaries were secured.

The draft 2027 budget, not yet published, shows spending of about 217 trillion dinars, the largest in Iraq’s history, according to economists Nabil al-Marsoumi and Abdulrahman al-Mashhadani, with oil revenue of about 140 trillion and a deficit of about 45 trillion, built on exports of around 4 million barrels a day. Iraq exported about 2.6 million in September, against 3.3 to 3.5 million before shipping through the Strait of Hormuz was disrupted. “How can a crisis budget amount to 217 trillion dinars, the largest in Iraq’s history?” Marsoumi asked, adding that salaries and welfare rise in the draft from 90 to 101 trillion. The new rate would raise about 10 to 11 trillion dinars a year, he estimated, which could be found instead through customs and tax collection.

Each dollar of oil revenue, which provides more than 90% of the state’s income, now yields 200 more dinars for salaries. Goods imported with dollars bought at the official rate will cost more in dinars; much of the market was already priced at the parallel rate. Mashhadani put the loss to salaries at about 13% for purchases at the official rate. The change would not necessarily close the gap with the parallel market, said financial markets expert Saif al-Halfi, who called for restoring dollar access for sanctioned banks, and economic adviser Adel al-Dulaimi warned that weaker demand could spread to commerce, industry and jobs. The prime minister’s financial adviser, Mazhar Mohammed Salih, called the government’s measures “advance precaution” against further disruption to oil exports and dollar inflows.

Revenues covered only 76% of salaries and welfare in the first seven months of the year, according to Marsoumi, and the government acknowledged a fiscal crisis on July 31. It is the first change to the official rate since February 2023, when the dinar was strengthened to 1,300 after a devaluation from about 1,182 to 1,450 in December 2020.