The exchange rate of the dollar in the parallel market in Iraq has exceeded 160,000 dinars for every 100 dollars, a scenario that reignites fears of widening the gap between the official rate and the market rate, coinciding with reports of new shipments of U.S. currency arriving in the country, amid questions about the ability of dollar liquidity to calm the market and curb speculation.
Data indicates the official rate remains at 1,320 dinars per dollar in official transactions, while the rate in the parallel market exceeded 160,000 dinars per 100 dollars even by Monday evening, reflecting a significant gap between the two rates and continuing pressures on the exchange market.
Reasons for the increase: speculation, anxiety, and delayed remittances
Economic expert Ali Dadoosh stated in a press interview that speculation and uncertainty, along with delays in official remittances through banks and increased demand for dollars to finance imports from Iran, represent the main causes of the current volatile rise in the exchange rate.
Dadoosh added that the uncertainty affects traders, importers, and citizens holding dinars, due to fears of potential changes to the exchange rate in the 2027 budget, noting that these factors collectively pressure the dollar in the parallel market.
He explained that the dollars circulating in the parallel market largely come from the currency sold by the Central Bank to citizens for purposes of travel, study, and medical treatment, part of which then returns to the local market after being sold, a phenomenon known as "reverse dollar" or "returned dollar."
He pointed out that the demand for dollars has greatly surpassed the available supply in the market, driving prices up and increasing volatility.
Banks: shipments alone are not enough
For his part, the director of Al-Ittihad Bank, Nabil Al-Abadi, mentioned in a press interview that the movement of the exchange rate in the parallel market is linked to a set of factors, the most important of which are the level of demand for dollars and the volume of its supply, in addition to the nature of transactions and remittances taking place outside the official banking channels.
He indicated that the arrival of new dollar shipments to official channels could help support liquidity, but their impact on the parallel market depends on the speed of their entry into the market and their reach to actual demand holders for the currency.
He emphasized that addressing the gap between the official and parallel rates is not solely related to injecting dollars, but requires enhancing the role of the banking sector and facilitating access for traders to foreign currency through official channels, thereby reducing the need for the parallel market.
What do the central bank's data say?
According to the data from the Central Bank of Iraq, foreign reserves decreased to 80.633 billion dollars by the end of July 2026, compared to 97.432 billion dollars at the end of the previous year, a decline of about 16.8 billion dollars, approximately 17.2 percent over seven months.
In contrast, the Central Bank confirmed in a statement issued on September 19 that its foreign reserves are sufficient to meet the demand for foreign currency for financing foreign trade and settling banking cards and traveler requests at the official rate, attributing the current rise in the exchange rate to speculation, expectations, and the exploitation of geopolitical conditions in the region.
From Kurdistan: Warning against fixing the dollar at 150,000
Concerns are not limited to Baghdad, as the spokesperson for the currency exchange market in Sulaymaniyah within the Kurdistan Region, Jabar Goran, warned of potential negative repercussions if the Iraqi government proceeded to fix the exchange rate of the dollar at 150,000 dinars, suggesting that this price would likely not be adopted in the general budget.
Goran stated during a press conference that "the reaction of citizens and the market will be negative and very bad if the Iraqi government fixes the dollar at 150,000 dinars," adding, "Therefore, I believe that the dollar rate will not be fixed in the budget at this level."
He also expressed his astonishment at the comments of a member of parliament regarding the possibility of adjusting the dollar exchange rate, pointing out that this matter falls under the authority of the Central Bank of Iraq.
He said, "It is strange to me that a deputy talks about adjusting the dollar rate, as this matter is solely within the powers of the Central Bank."
A real test for the Central Bank and the government
Observers believe that psychological factors and future expectations have become influential in market movement, as expectations of a rising dollar price prompt some traders to increase their demand in anticipation of any change, potentially creating additional demand that drives the price up and increases the gap.
Moreover, the ongoing difference between the official and parallel rates creates an incentive to seek dollars outside official channels, which makes addressing the gap dependent on the ability of the banking system to provide dollars regularly and transparently for legitimate demand, not just by increasing supply.
The current scene places the Central Bank and the government before a real test: increasing dollar liquidity may provide some relief for the market, but it will not be sufficient alone if the factors fueling demand and speculation persist.
The most significant question remains: do the new dollar shipments represent the beginning of a process leading to calming the market and reducing the gap, or will the parallel market absorb this liquidity and rise again? The answer will largely depend on the ability of official channels to meet demand and reinforce confidence in the stability of the exchange rate, as well as what the 2027 budget will carry in terms of decisions regarding the exchange rate.