By John Lee.
The Iraq Mission Chief for the International Monetary Fund (IMF) has said that he sees no reason to devalue the Iraqi dinar "under current circumstances", and says the authorities are "committed to maintaining the Iraqi Dinar’s peg to the U.S. dollar".
Christian Josz told IMF News:
"Iraq has maintained a peg to the U.S. dollar for years, and it has served the Iraqi economy well. The peg helps provide stability amidst a highly uncertain environment, especially with policy capacity weakened by the fight against ISIS. Under current circumstances and given the nature of the shocks, moving towards more exchange rate flexibility would not be warranted for two key reasons.
"First, Iraq is predominantly an oil exporter, and devaluing the Dinar would have minimal bearing on the economy’s overall trade competitiveness.
"Second, there is a notable degree of import dependence—almost half of Iraq’s consumption needs are imported—and devaluation would immediately trigger a spike in inflation for most food and other consumer goods, which would exacerbate already difficult social tensions.
"The authorities are committed to maintaining the Iraqi Dinar’s peg to the U.S. dollar under these circumstances, and we support this view."
(Source: IMF News)
(Dinar image via Shutterstock)