US Endorsement Fails to Help Iraqi Currency Exchange Rate

Hopes for recovery fail to materialize, dinar continues to drop

Dragged down by a crumbling currency, Iraqi officials had high hopes the bottom was reached this month, with the US endorsing a series of reforms meant to scale back limitations on use of the country’s dollar reserves.

Friday the 3rd saw the dinar bounce off of record lows, but predicted recoveries never materialized, and the currency is showing no signs of stabilizing. The exchange rate is settling back to those recent lows.

The unstable dinar’s problems have ground Iraq’s economy to a halt. With the US Federal Reserve controlling Iraq’s dollar reserves, even though Iraq has exported a lot of oil in trade for petrodollars, they’ve been unable to take advantage of those profitable exchanges with their own currency.

The US fears more dollar availability will facilitate smuggling in Iran and Syria, and has subsequently scaled back the access that propped up the dinar. This has prevented Iraq from rebuilding from the ISIS War and planning for future growth.

This level of control is exactly why, during the invasion and occupation, the US increased its grip on Iraq’s banks. They’re still struggling to find a balance, and it’s clear the market’s faith in US endorsements is less prevalent than its pessimism over the Fed making things worse.

Author: Jason Ditz

Jason Ditz is Senior Editor for He has 20 years of experience in foreign policy research and his work has appeared in The American Conservative, Responsible Statecraft, Forbes, Toronto Star, Minneapolis Star-Tribune, Providence Journal, Washington Times, and the Detroit Free Press.