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By Ahmed Tabaqchali, Chief Strategist of AFC Iraq Fund. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraqi Dinar's Devaluation: Context and Near-term Outlook

On October 7th, the Central Bank of Iraq (CBI) devalued the Iraqi dinar (IQD) by 13.3% against the U.S. dollar (USD), moving the official rate from 1,300 to 1,500 IQD per dollar - equivalent to a 15.4% rise in the dollar.

The devaluation's timing amplifies its effect: it increases the dinar value of the country's oil revenues by 15.4% just as oil exports recover to 75% of pre-war levels and expectations for future oil prices shift higher - a combination that magnifies the boost to oil revenues and, through them, to the wider economy.

This piece reviews the devaluation in context and considers the near-term outlook for government finances, the economy, and foreign reserves.

Oil Exports, Oil Revenues, and the 2026 Budget

The closure of the Strait of Hormuz in early March, following the onset of the U.S.-Israel war on Iran, led to the effective shutdown of Iraq's oil exports, 95% of which had passed through the Strait before the war. This could have had an immediate impact on the government's ability to meet its expenditures, as about 90% of its revenues come from oil exports. This, in turn, could have hurt the wider economy, given the state's outsized role, both through its provision of goods and services and through the public-sector payroll.

However, this initial loss of oil exports did not represent an immediate hit to oil revenues, which continued to flow into March-April, benefiting from the roughly two-month lag between oil exports and the receipt of their revenues. Nevertheless, the loss of oil exports in March-May translated into sharply lower oil revenues for May-July, with the beginning of oil export recovery in June reflected in the strong recovery of oil revenues in August (charts below).

Oil exports continued to recover, reaching about 68% of pre-war levels in August and 75% in September, with preliminary reports suggesting that the momentum carried into early October. This export recovery should begin to show in stronger oil revenues from September, with those for October-December benefiting further from the dinar's devaluation. Somewhat mitigating the drop in oil revenues was the strong growth in non-oil revenues, up 24% in January-August versus the same period in 2025, which benefited from the implementation of a new automated customs tariff system at the end of 2025.

Actual and Projected Oil Exports for 2026

(Source: State Oil Marketing Organization for January-June and August; Iraq Oil Report for July and estimates for September; AFC Research projections for October-December[1])

Actual and Projected Revenues and Expenditures for 2026

(Source: Ministry of Finance for January-August; AFC Research projections for September-December[1])

The state's expenditures are dominated by rigid current expenditures - made up of public-sector salaries, pensions, social security, benefits, and subsidies - which, reflecting the country's political economy, are exceptionally difficult to reduce even when oil revenues decline below expenditures. As such, the prior government, and the current government in office since May, continued with the usual cash-management toolkit - employed by all prior governments when oil revenues fall below expenditures - such as ad hoc cost savings and accumulating arrears to third parties, including domestic contractors and International Oil Companies (IOCs), together with the freezing of all new capital and investment spending projects. Despite these measures, there was a gap between revenues and expenditures in 2025, which continued into 2026 (chart above), but which increased significantly in April-June, then began to narrow in August, and is projected to narrow further as the year comes to an end (table below).

Actual and Projected Figures for the 2026 Budget

(Source: Ministry of Finance for January-August; Central Bank of Iraq for domestic debt to July, August estimated; AFC Research projections for September-December[1])

Foreign Reserves and the Exchange Rate

The government's continued spending, in particular its current expenditures, sustained domestic consumption, which in turn sustained the demand for imports. Surprisingly, this demand was relatively strong in the context of the disruptions brought by the closure of the Strait of Hormuz, as reflected in cross-border transfers (chart below), which are mostly used to pay for imports and are thus a proxy for domestic consumption. The application of the new automated customs tariff system at the end of 2025 had an initial depressing effect on demand, as reflected in the sharp drop in January, but demand recovered in subsequent months, with the drop in August being a function of new CBI procedures that constrained transfers.

Cross-Border Transfers (USD billion)

(Source: Central Bank of Iraq, data as of the end of August)

The continued drawdowns of foreign reserves to meet demand for cross-border transfers, not replenished by the conversion of oil revenues from dollars into dinars, led to a sharp decline in reserves, which by the end of September were down 23% from the levels at the end of 2025.[2] However, current levels are healthy, comfortably supporting at least 12 months of imports,[3] and are much higher than those that prevailed prior to the 18.5% devaluation in December 2020. As such, the current decision to devalue the dinar was a proactive one, buying the government time to decide on fiscal reforms, which is in sharp contrast to the historic head-in-the-sand stance of the country's political elite during periods of crisis.

In the near term, the pressures on foreign reserves should ease substantially, as reserves should be replenished by the conversion of increased oil revenues in October-December into dinars, while demand for cross-border transfers should be dampened somewhat by the effects of the dinar's devaluation on domestic consumption.

Foreign Reserves (USD billion)

(Source: Central Bank of Iraq, data as of the end of September)

Near-term Outlook

The near-term outlook for government finances, the economy, and foreign reserves is highly dependent on the continuation of the recovery in oil exports and on the continuation of the pause in the tit-for-tat attacks between the U.S. and Iran. While a few strong oil export months do not make a trend, especially in this highly fluid and dangerous period, current market expectations for future oil prices, as measured by Brent futures contracts, promise a measure of stability for all three.

Expectations for future oil prices following the collapse of the Islamabad Memorandum of Understanding have consistently shifted higher, suggesting an acceptance that the current pause in the tit-for-tat attacks between the U.S. and Iran is evolving into a surreal new normal of no-war/no-peace (chart below).

Market Expectations for Future Oil Prices (USD per barrel)
As measured by Brent futures contracts

(Source: U.S. Energy Information Administration, investing.com, AFC Research, data as of October 16th)

As such, the combination of likely higher near-term oil prices, continued strong oil export recovery, and the 13.3% devaluation of the dinar would substantially improve the government's financial position for the year (budget table) and provide a measure of stability for the economy and foreign reserves - although reserves would still trend lower, albeit at a much slower rate.

The three positives of higher oil prices, continued strong oil export recovery, and the 13.3% devaluation of the dinar, while necessary, are not sufficient to sustain economic stability without addressing the budget's structural imbalances of rigid expenditures and revenue volatility. Nevertheless, they have provided the government with breathing space to decide on fiscal reforms, in particular those that could come with an International Monetary Fund (IMF) programme, such as the Stand-By Arrangement (SBA) signed in 2016, or, better still, the more substantial Extended Fund Facility (EFF).

Any IMF programme would face extreme resistance from the public and the political elite, who together rejected the White Paper for Economic Reform, which came in response to the financial crisis of 2020 and aimed to address the economy's structural imbalances.[4] That said, the continued need for debt to augment oil revenues, irrespective of the future direction of oil prices, requires the issuance of foreign debt in the form of Eurobonds, which would not come without an IMF programme, to supplement domestic debt - as the issuance of domestic debt on its own will continue the pressure on foreign reserves, while foreign debt will increase them.

Despite domestic resistance to an IMF programme, the proactive decision to devalue the dinar - breaking the historic head-in-the-sand pattern - signals the seriousness of the government's tentative engagement with the Fund over recent months. That engagement has since solidified: at the close of the IMF-World Bank Annual Meetings in Bangkok on October 17th, the IMF's Managing Director confirmed that the authorities had requested a programme, pledging "both money and policy support".

While such an engagement would likely take many months to conclude, the three positives outlined above have opened a window of up to a year for these discussions, as can be seen from the near-term implications of Brent crude prices under the assumption of continued oil export recovery. Current expectations imply an average Brent price of USD 92.5 per barrel (USD/bbl) for 2026, a projected average of USD 95.1/bbl for 2027, and USD 81.2/bbl for 2028, which, for Iraq under the current assumption of no-war/no-peace, means realised prices about USD 32/bbl below Brent for the balance of 2026 and for 2027-2028.

Assuming expenditures over the next two years are in line with those projected for 2026, this suggests that the budget's deficit for 2027 could be better than that of 2026, but that the deficit for 2028 could be worse. In the short term, this would allow domestic debt to fund the deficit without significantly eroding reserves, while in the medium term foreign debt would be needed - all of which support the conclusion of an IMF programme.

Notes

[1] Methodology: Projections for oil exports assume incremental month-on-month increases from September's estimated levels. Blended oil prices for southern oil exports assume a discount of USD 32 per barrel (USD/bbl) to Brent crude prices, while northern oil exports assume a discount of USD 5/bbl to Brent (September reflects actual Brent spot prices; December reflects futures prices as of October 16th; October and November are interpolated between the two). Budget oil revenues are derived from projected export receipts (0.44 x current month + 0.56 x two months earlier), less a 15% haircut, and converted at 1,461 IQD/USD in October and 1,500 IQD/USD in November-December. Projected non-oil revenues assume full-year growth of 16%, down from 24% year-on-year in January-August. Projected expenditures assume continued cost controls; each month's projected expenditures are based on the average of the preceding three months and include oil capital expenditures (15% of oil revenues), which were minimal in January-August.

[2] Reserves are created when the Ministry of Finance (MoF) converts its dollar oil revenues into dinars: the Central Bank of Iraq (CBI) buys the dollars from the MoF and sells it the equivalent in dinars. Cross-border transfers, on the other hand, are the reverse transaction: the private sector, through the banks, sells dinars to the CBI and buys dollars from its reserves. Reserves therefore increase when the CBI buys more dollars from the MoF than it sells to the private sector, and decline when it sells more than it buys. See: (1) Ahmed Tabaqchali, "A Fistful of Dinars: Demystifying Iraq's Dollar Auction," LSE Middle East Centre, April 18th, 2024, pp. 7-11, https://researchonline.lse.ac.uk/id/eprint/122652/; (2) Ahmed Tabaqchali, "The Empire Strikes Back: Trump 2.0 and Iraq's Dollar Accounts at the Federal Reserve," LSE Middle East Centre Blog, March 4th, 2025, https://blogs.lse.ac.uk/mec/2025/03/04/the-empire-strikes-back-trump-2-0-iraqs-dollar-accounts-at-the-federal-reserve/.

[3] Reserves as of the end of September, divided by the 18-month average of cross-border transfers, would cover at least 12 months of transfers. A CBI official at the MERI Forum in Erbil on October 13th stated that reserves cover Iraq's imports for a year or more. See: Al-Mada, "Central Bank: Our Foreign Reserves Cover Iraq's Imports for a Full Year or More" (in Arabic), October 14th, https://almadapaper.net/456706/.

[4] Ahmed Tabaqchali, "Missed Opportunities for Economic Reform," in Iraq 20 Years On: Insider Reflections on the War and Its Aftermath, Chatham House, May 4th, 2023, https://www.chathamhouse.org/2023/03/iraq-20-years-insider-reflections-war-and-its-aftermath/missed-opportunities-economic.

Please click here to download Ahmed Tabaqchali's full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the Chief Strategist of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years' experience in US and MENA markets. He is a board member of Arab Bank Iraq, a Visiting Fellow at the LSE Middle East Centre, Senior Fellow at the Institute of Regional and International Studies (IRIS), and a Senior Non-resident Fellow at the Atlantic Council.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

By Nick Davis, for Chatham House. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Why US pressure cannot disarm Iraq's militias

The Trump administration's push to disarm Iraq's Iran-backed militias by 30 September has not been realized, not for lack of pressure, but because of a longstanding contradiction in US policy.

Since 2003, actions of the US explicitly framed as stabilizing Iraq have repeatedly contributed to destabilizing it.

The ensuing disorder has strengthened the militias.

Click here to read the full article.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Deep Dive: Iraq Caught in Middle as Trump Pursues 'Air Blockade' of Iran

New US sanctions targeting more than two dozen Iranian airlines took effect on 23rd September, threatening any entity serving the sanctioned carriers.

Click here to read the full article.

By John Lee.

Iraq's new ambassador to the United States, Krikor Der Hagopian, has presented his credentials to President Donald Trump at a formal ceremony at the White House.

According to the Iraqi Ministry of Foreign Affairs, Der Hagopian conveyed greetings from the Iraqi government and stated that his mission's priorities would include following up on outcomes from the Prime Minister's recent visit to the United States, building a new era in Iraqi-American relations, and deepening strategic ties, including political, economic, investment, and security cooperation.

He succeeds Nazar Al-Khirullah, and according to local media, is the first Armenian Christian to hold the position.

(Sources: Iraqi Ministry of Foreign Affairs; local media)

By Yesar Al-Maleki, for the Atlantic Council. Any opinions expressed here are those of the author(s) and do not necessarily reflect the views of Iraq Business News.

Can Oil Deals Reset US-Iraqi Relations?

As Iraq and the United States enter a new phase in their relationship, oil is assuming a more central role.

During Prime Minister Ali al-Zaidi's first visit to the White House in July, President Donald Trump framed the shift explicitly: as US forces withdraw by September 30, American oil companies should take their place.

Recasting the relationship on trade and investment is essential, but delivering that transition will be difficult. . This has only become more urgent after Iran's closure of the Strait of Hormuz exposed the vulnerability of Iraq's oil-dependent economy.

Click here to read the full article.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Iraq-Syria Rapprochement Makes Baghdad More Valuable, Not More Exposed

On July 8, 2026, the Donald Trump administration informed the US Congress of its intent to rescind Syria's designation as a state sponsor of terrorism, a label the country had carried since 1979.

The move follows a June 2025 executive order unwinding the sanctions architecture, and has been the clearest signal yet that Washington intends to shift Damascus from a pariah state into a functioning regional partner.

The move follows the May 31 appointment of US Ambassador to Turkiye Tom Barrack as presidential envoy for Iraq and Syria. Barrack has described the three countries now under his purview as the region's "strategic fulcrum," suggesting that all are now being seen in Washington as a single theater of US policy.

Click here to read the full article.

By Ahmed Mousa Jiyad. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Al-Zaidi' Government on Petroleum Issues and Washington DC Visit

The Iraqi Council of Representatives (Parliament) voted on 14th May 2026 to endorse the new government headed by PM Ali Al-Zaidi, and approved its Minhaj (preliminary program) for government.

The same day, Al-Zaidi received a call from Tom Barrack, the US President Donald Trump's Special Envoy, congratulating him and expressing Trump's readiness to cooperate with him and his government.

Presenting the Minhaj by the new government and accepting it by the Parliament is a Constitutional prerequisite to form and confirm the new government, and the government should, based on the Minhaj, submit its Barnamaj (detailed program), according to which it will be accountable.

Click here to view the full report (pdf).

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq's Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad's biography here.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Exclusive: Iraqi PM Pitches 'Trilateral Business Opportunities' to Iran, US

Iraq's prime minister did not deliver a ceasefire proposal by the Donald Trump administration during his recent visit to Iran, senior sources in Baghdad and Tehran have confirmed to Amwaj.media.

Throwing cold water on a New York Times report which cited unnamed Iraqi and Iranian sources as saying that Iran rejected a "US proposal" for a truce, informed sources say Ali Al-Zaidi's focus was on business.

While the 41-year-old-who only took office in May-lacks experience in international politics, he has an established background as a successful entrepreneur.

Click here to read the full article.

By Guest Blogger. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

1. A historic volume of agreements - 48 in total

A total of 48 agreements, memoranda of understanding, cooperation agreements and partnership declarations were signed between public and private sector entities in Iraq and the United States during the five-day visit. In total, Iraq's initial agreements with US firms, spanning the energy, healthcare and technology sectors, are worth more than $60 billion.

2. Major oil and energy companies ink deals

The agreements include cooperation and partnerships involving the Iraqi ministries of oil and electricity with ExxonMobil, KBR, GE Vernova, Shell and Halliburton. Chevron also signed two additional agreements with Iraq focused on boosting oil production.

3. Iraq-Syria crude oil pipeline to be revived

Iraq and Syria signed a cooperation agreement to reconstruct the long-defunct Iraq-Syria oil pipeline, which runs from the oil-rich Kirkuk region in northern Iraq to Syria's Mediterranean port of Banias [Baniyas]. Iraq's state news agency reported that Chevron would carry out the project. The US Department of State welcomed the plan, stating that upon rehabilitation the pipeline would have an initial transport capacity of two million barrels per day.

4. Pipeline deal framed as making Hormuz "an afterthought"

US ambassador to Türkiye Tom Barrack said Iraq's latest oil pipeline agreements would lead to a programme "that will make the Strait of Hormuz an afterthought." The deals come as Baghdad seeks to move away from dependence on the Strait of Hormuz, where shipping and oil exports have been heavily disrupted due to the US-Israel war against Iran.

5. Starlink deal for satellite internet services

Iraq signed a deal with Starlink to introduce services to the country. This forms part of a broader push to attract US companies across the technology sector.

6. Oil production ambitions front and center

Al-Zaidi said Iraq seeks to increase oil production to seven million barrels per day over the next three years, up from its current output of about 4.5 million bpd. A sovereign wealth fund structured around oil exports was also discussed as a vehicle for funding future development.

7. US companies given priority across key sectors

Al-Zaidi's government said it would prioritise US companies in energy, communications, technology and development projects, with the prime minister stating his goal is to move bilateral relations "from a phase of security cooperation to a sustainable economic partnership."

8. Deals signed at a US-Iraq Business Summit

The preliminary deals were signed at a US-Iraq business summit at the US Chamber of Commerce in Washington. Al-Zaidi told attendees: "We are using an open-door policy. Everybody who has a project can come and talk to us. We will not make it difficult for anyone."

9. Corruption crackdown cited as a confidence-builder for investors

Al-Zaidi has launched a corruption crackdown, with raids yielding millions of dollars in seized assets, a signal intended to reassure US partners that Baghdad is serious about improving the business environment.

10. Strategic shift from security to economic partnership

Al-Zaidi said discussions with Trump focused on strengthening bilateral relations, expanding economic cooperation and creating opportunities for American companies to participate in development projects in Iraq, particularly in the energy sector, stressing the importance of building commercial ties rather than focusing solely on military cooperation.

From Amwaj Media. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News.

Iraq's Zaidi Courts US Investment amid Resistance from Iran-Backed Factions

Iraqi Prime Minister Ali Al-Zaidi has held high-level meetings in Washington with President Donald Trump and other senior officials.

The July 13 visit, his first since taking office in May, prioritized economic, energy and investment cooperation aiming to provoke a positive shift in relations.

Amid significant debate over Zaidi's outreach in Iraqi media, some Iran-backed 'resistance' factions say they will refuse to recognize any accords that might stem from it.

Click here to read the full article.