With Iraq's public finances struggling to cope because of lower oil prices and the Covid-19 pandemic, the central bank has stepped in to make export revenues go further. On Saturday it devalued the dinar by 24%, effective immediately, meaning oil dollars will now be converted into considerably more dinars at home, giving the government extra funding to run the country.
For expatriate workers in Iraq who are paid at least partly in foreign currencies, the same applies. However, the boost to their purchasing power from the improved exchange rate is likely to soon be at least partly offset by higher inflation. The latest official annual inflation rate was low at 0.7% to the end of October, but this is sure to rise.
The Iraqi dinar's value has been fixed against the US dollar for decades - since 2017 at a rate of USD 1 / IQD 1182. The new rate is USD 1 / IQD 1470. Being also fixed, this rate could soon become overvalued, so the black market is likely to continue to thrive.
The devaluation is the latest of several globally, including in Tajikistan, Cuba and Libya, and this trend reflects the extreme shocks suffered by economies and government finances during this extraordinary year. At least it's nearly over, eh?
If you need guidance on remunerating international staff in Iraq or anywhere else, please do get in touch.