Among Them Is The Economic Contraction.. An Expert Reveals The Reasons Behind The Decline In The Exchange Rate.
July 31, 2025 Baghdad/Iraq Observer Economic expert Munar Al-Obaidi confirmed that the exchange rate of the US dollar against the Iraqi dinar has witnessed a significant decline recently.
This decline is due to a group of intertwined economic and procedural factors, which vary in their level of influence but have collectively contributed to strengthening the dinar.
Al-Obaidi told the Iraq Observer that “the reasons for the dollar’s decline include the economic contraction and declining consumer confidence.
The state of uncertainty in the Iraqi market, as a result of the economic slowdown, has led to a decline in the confidence of individuals and institutions in spending, which has negatively impacted the volume of public demand, thus reducing the need for the dollar as a stimulus for trade.
In addition, the halt in government investment spending has led to the government focusing on operational spending rather than investment spending, leading to a decline in economic activity.”
He added that “the general budget is the primary driver of economic activity, and reducing investment spending has reduced aggregate demand, including demand for the dollar.”
He noted that “other reasons include tightening controls at border crossings and government measures to curb smuggling and regulate relations with the Kurdistan Region, which have contributed to reducing the phenomenon of inflated invoices, which has reduced the unreal demand for dollars in the parallel market.”
Regarding the shift of traders to the formal banking system, Al-Abidi explained that “the markets have witnessed the entry of a large segment of traders into the formal banking system, and their reliance on the official dollar exchange rate through approved platforms, which has reduced the volume of trading in the parallel market and reduced pressure on the dollar, in addition to a decline in re-export operations.
The decline in the re-export of goods to neighboring countries has led to a reduction in demand for imported goods, which has directly reflected in a decline in the need for dollars to finance these commercial operations.”
He emphasized that settling major companies’ dues in oil products instead of cash also had an impact on depreciating the dollar, as the government settled a portion of foreign companies’ dues in black oil and naphtha instead of cash, reducing reliance on dollars sold by the Central Bank and increasing their supply in the market.”
He pointed out that “preparations for the electoral process also play a role.
With the start of the election season, the volume of spending related to the electoral campaigns increased, and this spending is often financed from cash reserves stored in dollars, which necessitated converting large amounts of them into dinars to cover campaign expenses, thus increasing the supply of dollars and increasing the number of foreign visitors and arrivals.
The increasing number of arrivals to Iraq contributed to the introduction of quantities of foreign currencies into the local market, which provided an additional source of hard currency outside the framework of central bank sales, and contributed to strengthening the availability of dollars.”
He continued, saying, “The halt to illicit trade as a result of the closure of the border with Syria played
a significant role in the decline of the dollar.
The closure of border crossings with Syria contributed to the reduction of smuggling and illegal trade, which had been heavily dependent on the dollar in the parallel market, leading to a further decline in demand for the dollar.”
He concluded by saying, “The decline in the issued currency and the withdrawal of a portion of it from the market is another reason behind the decline in the dollar price.
The Central Bank of Iraq withdrew a portion of the dinar money supply from the market,
creating a double demand for the Iraqi dinar against the dollar.
This balance in demand levels between the two currencies helped boost the value of the dinar and raise its exchange rate against the dollar on the parallel market.” https://observeriraq.net/بينها-الانكماش-الاقتصادي-خبير-يكشف-ال/
“They Wasted Two Years Between Transactions.” This Is How An Iraqi Investor Left His Country.
Economy Yesterday, | Baghdad Today – Baghdad The Iraqi investor’s decision to establish a modern water treatment plant in Jordan instead of Iraq was not a purely economic one, but rather a concrete embodiment of the idea of “escaping from a land of stagnant opportunities to a land of clear rules.”
The factory, which is scheduled to begin production in March 2026, will produce glass products including probiotics, sparkling water, and vitamin-enriched water.
Most of the products will be destined for the Gulf and European markets,
while Iraq, the country of origin, remains an unfeasible prospect, according to the project owner.
Economist Nabil Al-Marsoumi, who reported this experience in a blog post followed by Baghdad Today, did not merely present a story, but pointed to a deeper structural flaw, saying:
“An Iraqi businessman has begun establishing a modern factory in Jordan to produce various types of healthy and mineral water, using glass containers.
These include probiotics, multivitamins, sparkling and still water, and fruit-flavored water.
Production is scheduled to begin in March 2026, and most of the production is reserved for export to the Gulf and Europe.”
According to what Al-Marsoumi quoted from the investor,
the decision not to implement the project in Iraq was due to what he described as an “investment-repelling environment.”
He explained, “My decision not to implement the project in Iraq stems from industry constraints, licensing, and bureaucratic complications, in addition to the lack of confidence in Iraqi products in foreign markets, which I consider a decisive factor in making the decision.”
The investor added, “I previously tried to add a production line to a water factory in Iraq,
and I’ve been working on the process for exactly two years.
They made me regret the day I thought of investing in Iraq.”
Independent economic studies show that Iraq is one of the countries in the region richest in untapped investment opportunities: a large consumer market, a pivotal geographic location, vast natural esources, and a promising private sector.
However, these potentials rarely translate into actual projects,due to what is known as the “trust gap“—
the gap between investors and the system supposed to protect and empower them.
In an environment where the powers of the central government and the governorates overlap, where the authorities of official bodies intersect, and where regulatory bodies proliferate without clear legal basis, any productive project becomes a daily battle, one that has nothing to do with the product or its feasibility, but rather with the cumbersomeness of procedures.
Data from the Iraqi Ministry of Planning indicate that the
private sector’s contribution to GDP rose from 32.4% in 2020 to approximately 39.5% in 2024.
However, this percentage, while encouraging on paper, does not reflect a real shift in the state’s investment philosophy.
Rather, it demonstrates the pressures on the state itself, given recurring financial crises and the shrinking capacity of the public sector to absorb additional employment.
In contrast, neighboring countries—such as Jordan, Turkey, and the UAE— continue to attract Iraqi projects, not through exceptional financial privileges, but rather through clear procedures, consistent policies, and global market confidence in their legal and regulatory systems —something Iraq still lacks today.
This investor’s experience, as reported by Al-Marsoumi, is not an exception. Rather, it embodies a recurring pattern, according to observers of Iraqi investment affairs, spanning sectors from agriculture to industry, from technology to services. Cumbersome procedures, a lack of transparency, the absence of commercial arbitration, and conflicting jurisdictions all constitute what can be termed a “soft repellent environment,”
one that doesn’t expel investors by administrative order, but rather exhausts them until they withdraw voluntarily, burdened with disappointment and hesitation.
Some researchers argue that the question is not “Why did he choose Jordan?” but “Why did he not find in his country an incentive to stay?”
When neighboring countries become more attractive to Iraqi projects than Iraq itself, the fault lies not in the capital, but in the infrastructure that is supposed to accommodate it.
When an Iraqi-funded water plant is built in Amman, the irony lies not in the location, but in the deep gap in trust it reveals in the state, not the project. https://baghdadtoday.news/279861-.html
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