Iraq devalued its currency by about 20% against the dollar, the biggest cut on record, as the cash-strapped government faces an economic crisis brought about by low oil prices and crude-production cuts.
The central bank reduced the official rate to 1,450 dinar per dollar, the first devaluation since 2003, it said in a statement. That’s from about 1,190 previously. Dollars will be resold to local banks at 1,460 dinar apiece.
The world’s third-largest oil exporter is taking the steps to avoid depleting its foreign-currency reserves after the coronavirus sapped demand for energy and caused prices to collapse. The government last month sought upfront payments in exchange for a long-term crude-supply contract to help mitigate its dire financial situation.
Prime Minister Mustafa Al-Kadhimi, who came to power in May, has warned that the government will struggle to pay civil servants without raising more debt. That’s threatening a repeat of the upheaval that last year brought down the government and saw hundreds of protesters killed.
Demonstrators at a rally at Tahrir Square at the end of October bemoaned corrupt politicians, daily power cuts, dilapidated hospitals, crumbling roads and a lack of jobs, and urged the government to ignore OPEC output cuts.
The International Monetary Fund expects Iraq’s economy to shrink 12% this year, more than that of any other OPEC member under a production quota, and that its budget deficit will reach 22% of gross domestic product.