The Path to an IQD Currency Adjustment RV — Explained Simply
Iraq could strengthen the value of its currency over time if the Development Road Project really takes off, but it would not be “easy” or automatic. Think of the Development Road as a new income stream for the country: a land bridge that connects Asia to Europe through Iraq, with ports, railways, and highways that turn Iraq into a big transit hub. Official estimates say this corridor could handle millions of tons of freight and generate around $4 billion a year and over 100,000 jobs once fully up and running.
If the government manages that money wisely—saving part of the transit fees and related tax income in foreign reserves at the Central Bank instead of just spending it—then Iraq’s “savings account” in dollars and euros grows. Higher, stable foreign-exchange reserves plus more non-oil income usually make a currency look safer and more attractive, which can justify a stronger exchange rate in the future.
At the same time, the Development Road brings in foreign investors from Turkey, the Gulf, and beyond to build and operate logistics centers, industrial zones, and services along the route. (Ministry of Foreign Affairs of Türkiye) When investors come, they often need to hold and use the local currency for salaries, local contracts, and taxes.
That extra demand for dinars, on top of higher exports and transit fees, can support a stronger currency—if the government keeps its budget under control and does not flood the system with new spending. Right now, the IMF is warning that Iraq’s recent big spending plans have raised the oil price it needs just to balance the budget and increased the risk of debt stress. (IMF) So the Development Road helps only if Baghdad uses the new income to reduce deficits and build reserves, not to create more unsustainable spending.
On the technical side, the Central Bank of Iraq (CBI) already runs a conventional peg: the dinar is fixed at about 1,300–1,320 IQD per U.S. dollar, after a small “revaluation” in February 2023 when they moved the rate from 1,450 to 1,300. (IMF eLibrary) Before any further, meaningful revaluation, the CBI has to hit several checkpoints. First, it must keep inflation low and stable.
Recent IMF reports say inflation dropped to around 4 percent by end-2023 and to about 2.6 percent in 2024, helped by tighter policy and earlier exchange-rate moves. (IMF eLibrary) That’s good, because a stronger currency only makes sense when prices at home are under control. Second, it must maintain strong foreign-exchange reserves and manage the peg credibly, which means intervening in the FX market when needed and making sure it can always meet dollar demand at the official rate. (IMF) The more diversified Iraq’s income is (oil + transit fees + non-oil taxes), the easier this becomes.
Third, the CBI has to clean up and modernize the banking and foreign-exchange system. Iraq has been trying to restrict cash dollar use and move to more transparent, electronic transactions to cut down on smuggling and sanctions-related leaks. From January 1, 2024, they began banning cash withdrawals and cash transactions in U.S. dollars, precisely to stop misuse of reserves and tighten control over the FX market. (Reuters)
The IMF and the CBI are also pushing hard to reform weak private banks and state-owned banks, improving regulation and internal controls, though these reforms have recently been delayed because of resistance from the banks. (IMF) A healthier banking system is critical: if banks are weak or non-compliant, a big revaluation could trigger chaos instead of confidence.
Fourth, the CBI would need to narrow and control the gap between the official rate (around 1,300 IQD per USD) and the street/parallel market rate, which has often been higher because of smuggling and U.S. restrictions on some Iraqi banks. (CryptoRank) A credible revaluation normally happens after the authorities have unified the rate and shown they can enforce rules consistently.
Finally, any move in the exchange rate has to be coordinated with the government budget: Iraq’s three-year federal budget explicitly uses 1,300 dinars per dollar for salaries, contracts, and spending plans. (CryptoRank) Changing the rate without adjusting the budget and contracts could blow up the deficit or create huge legal and political problems.
For IQD investors, here’s what all this means in plain language. If Iraq keeps inflation low, builds up reserves using both oil and Development Road income, cleans up its banks, reduces dollar cash use, and brings the street rate close to the official peg, then the CBI could decide at some point to strengthen the official rate again—maybe gradually, maybe in small steps. In that scenario, a holder of physical dinar outside Iraq might see a gain relative to the U.S. dollar, if they can actually exchange at the new official rate through compliant banks or brokers. But there are big caveats.
The CBI’s primary job is to protect Iraq’s economy, not to create windfalls for foreign speculators. They can choose very modest changes (like 1,300 to 1,200), or they might maintain the current peg for many years. They might even restructure the currency (for example, removing zeros but adjusting prices at the same time), which changes how profits look for people holding old notes.
It’s also important to remember that the Development Road is a long-term project with stages planned out to 2028, 2033, and even 2050, not a short-term event that automatically flips a switch on the dinar. (Wikipedia) At the same time, the IMF is warning that Iraq’s budget is under pressure and that debt risks are rising, especially if oil prices fall. (IMF) In a negative scenario—political instability, lower oil prices, weak reforms—the currency could just as easily come under pressure to devalue or stay where it is, rather than revalue up.
So, in simple terms: the Development Road can strengthen Iraq’s financial “muscles” by bringing in more non-oil money and investors, and the Central Bank has a clear to-do list—keep inflation low, build reserves, fix banks, clean up the FX market, and coordinate closely with the budget—before any serious revaluation is even on the table.
For IQD investors, there is potential upside if Iraq gets all of this right, but there is no guarantee, the process is likely to be gradual, and the main beneficiaries the authorities have in mind are Iraqi citizens and the domestic economy, not external currency speculators. This isn’t financial advice, just a plain-English explanation of what would need to happen in reality before the dinar could genuinely and sustainably be worth more against the U.S. dollar.
But we still have the problem of the over printing of the currency!
