Iraqi Dinar Prospects: Reality Check After Six Months of Trump
Iraqi Dinar Prospects: Reality Check After Six Months of Trump
Six months into Donald Trump's return to the presidency, the Iraqi dinar finds itself at a crossroads between economic fundamentals and persistent speculation. Whilst the currency's boosters continue to proclaim imminent revaluations, the reality on the ground tells a rather different story-one of mounting pressures on Iraq's economy that suggest further weakening, not strengthening, of the dinar.
The Numbers Don't Lie
Market projections indicate potential slight depreciation, with the exchange rate possibly reaching around 1,318 IQD per USD by the end of 2025. This represents a continued weakening from current levels, reflecting the deteriorating economic conditions that have emerged during Trump's first six months in office.
More optimistic forecasts suggest modest improvements, with the USD/IQD exchange rate might improve from 1,276.640 in March 2025 to 1,217.448 by December 2025, though even these projections show only marginal strengthening that would hardly satisfy those expecting dramatic revaluations.
The gulf between these professional forecasts and the expectations of dinar enthusiasts could not be starker. More than half of respondents expected the Iraqi dinar to revalue by at least 1,000x in the first 100 days of Trump's term -- a prediction that has been thoroughly debunked by events.
Economic Fundamentals Under Pressure
The fundamental drivers of currency value paint a concerning picture for the dinar's prospects. The current account is expected to weaken considerably in 2025 primarily due to declining oil export revenues. The deterioration in the external position is projected to weigh on foreign reserves.
Iraq's foreign currency reserves, whilst still substantial, are showing signs of strain. Iraq's foreign currency reserves are sufficient to finance 13 months of imports, despite a recent decline in coverage, according to the Central Bank. The Central Bank of Iraq (CBI) revealed that the country's foreign exchange reserves declined in May 2025, marking a concerning trend as oil revenues continue to fall.
The IMF's assessment is particularly sobering, noting that Iraq's vulnerabilities have increased in recent years due to a large fiscal expansion, precisely at a time when the government's main revenue source-oil exports-faces sustained pressure from both price declines and geopolitical disruptions.
Trump's Policies: A Double-Edged Sword
Leading Iraqi economists have warned that Trump's policies could actively harm the dinar. A leading Iraqi economist has predicted that US President Donald Trump's pressure to reduce oil prices will harm the Iraqi economy, and could lead to a devaluation of the Iraqi dinar.
This assessment reflects the reality that Iraq remains overwhelmingly dependent on oil revenues, which constitute roughly 90% of government income. Any sustained pressure on oil prices-whether through Trump's energy policies, sanctions on Iran affecting regional markets, or broader geopolitical tensions-directly undermines the fiscal position that underpins the dinar's stability.
Trump's renewed "maximum pressure" campaign against Iran has created additional complications. The removal of sanctions waivers that previously allowed Iraq to import Iranian energy has forced Baghdad to seek more expensive alternatives, further straining the government's finances and potentially requiring drawdowns of foreign reserves that support the dinar's exchange rate.
The Revaluation Delusion Persists
Despite six months of evidence contradicting their expectations, dinar revaluation theorists show little sign of abandoning their beliefs. The lack of any statement, policy, or indication from Trump regarding the Iraqi dinar has been met with increasingly creative explanations from supporters of the theory.
The fundamental misunderstanding underlying these expectations appears to be the belief that currency revaluations are political decisions that presidents can simply decree, rather than market-driven responses to economic fundamentals. The comparison some make to Kuwait's dinar post-liberation ignores the vastly different economic circumstances and structural reforms that accompanied that currency's strengthening.
Looking Forward: Modest Hopes, Harsh Realities
The most optimistic realistic scenario for the dinar involves gradual stabilisation rather than dramatic appreciation. This would require Iraq to successfully diversify its energy imports away from Iran, maintain political stability, and weather the current period of reduced oil revenues without excessive drawdowns of foreign reserves.
However, several factors work against such optimism:
Fiscal Pressures: With oil prices well below budgeted assumptions and production facing constraints, Iraq's government faces mounting pressure to either cut spending or increase borrowing-both of which could weaken confidence in the dinar.
Regional Instability: Trump's unpredictable approach to Middle Eastern policy creates ongoing uncertainty that typically undermines emerging market currencies like the dinar.
Structural Dependencies: Iraq's overwhelming reliance on oil exports leaves it vulnerable to external shocks, whether from market conditions, sanctions, or regional conflicts.
The Reality Check
For those holding Iraqi dinars in expectation of massive revaluations, the first six months of Trump's presidency have delivered a harsh reality check. Professional market forecasts suggest, at best, modest movements in the exchange rate-nothing approaching the transformative gains that speculators expect.
The economic fundamentals that determine currency values-fiscal position, foreign reserves, trade balance, and political stability-all point towards continued pressure on the dinar rather than the dramatic strengthening that revaluation theorists predict.
Iraq's path to currency stability lies not in presidential proclamations or speculative theories, but in the hard work of economic diversification, institutional reform, and fiscal discipline. Until these fundamentals improve, the dinar's prospects remain constrained by the same structural challenges that have defined Iraq's economy for decades.
The lesson from Trump's first six months is clear: currencies reflect economic realities, not political fantasies. The Iraqi dinar's future depends on Iraq's economic performance, not on the whims of foreign presidents or the hopes of speculative investors.
For more information on the Iraqi dinar, check out IBN's Dinar Page here: https://www.iraq-businessnews.com/the-dinar-page/?swcfpc=1
See also: Trump & Crypto: Will Bitcoin's Success Translate to the Iraqi Dinar?
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Memri
2 hours ago
- Memri
Indian Foreign Ministry Responds To U.S. Tariff Threats Over Russian Oil Purchase: 'It Is Revealing That The Very Nations Criticizing India Are Themselves Indulging In Trade With Russia'
On August 4, 2025, India's Foreign Ministry published a statement, responding to the U.S. threats over an additional unspecified penalty for India's trade with Russia for crude oil. The U.S. administration has already imposed a sweeping 25-percent tariff on all Indian-origin goods, effective August 7, 2025. In the statement, India stated that "the very nations criticizing India are themselves indulging in trade with Russia. Unlike our case, such trade is not even a vital national compulsion." It then added: "Europe-Russia trade includes not just energy, but also fertilizers, mining products, chemicals, iron and steel and machinery and transport equipment. Where the United States is concerned, it continues to import from Russia uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilizers as well as chemicals." Responding to India's statement, President Donald Trump said he "doesn't know anything" about U.S. imports of fertilizers and chemicals from Russia. During a press conference, Trump was asked: "India says the U.S. buys Russian uranium and fertilizers while criticizing them for buying Russian energy. Your response to that? Trump answered: "I don't know anything about it. We will have to check."[1] President Donald Trump signed an executive order on August 6 to place an additional 25-percent tariff on India for its purchases of Russian oil, bringing the combined tariffs imposed by the U.S. on India to 50 percent.[2] Following is the text of the statement by India's Foreign Ministry:[3] "The Targeting Of India Is Unjustified And Unreasonable" "India has been targeted by the United States and the European Union for importing oil from Russia after the commencement of the Ukraine conflict. In fact, India began importing from Russia because traditional supplies were diverted to Europe after the outbreak of the conflict. The United States at that time actively encouraged such imports by India for strengthening global energy markets stability. "2. India's imports are meant to ensure predictable and affordable energy costs to the Indian consumer. They are a necessity compelled by global market situation. However, it is revealing that the very nations criticizing India are themselves indulging in trade with Russia. Unlike our case, such trade is not even a vital national compulsion. "3. The European Union in 2024 had a bilateral trade of Euro 67.5 billion in goods with Russia. In addition, it had trade in services estimated at Euro 17.2 billion in 2023. This is significantly more than India's total trade with Russia that year or subsequently. European imports of LNG in 2024, in fact, reached a record 16.5mn tonnes, surpassing the last record of 15.21mn tonnes in 2022. "4. Europe-Russia trade includes not just energy, but also fertilizers, mining products, chemicals, iron and steel and machinery and transport equipment. "5. Where the United States is concerned, it continues to import from Russia uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilizers as well as chemicals. "6. In this background, the targeting of India is unjustified and unreasonable. Like any major economy, India will take all necessary measures to safeguard its national interests and economic security."
Shafaq News
2 hours ago
- Shafaq News
US opposes Iraqi PMF law, warns against 'militia' participation in elections
Shafaq News – Washington The United States reaffirmed its opposition to Iraq's proposed law regulating the Popular Mobilization Forces (PMF), warning that the legislation undermines efforts to strengthen Iraq's sovereignty and existing security institutions. A US State Department spokesperson told Shafaq News that Washington 'strongly opposes any legislation that is inconsistent with the goals of our bilateral security assistance and partnership,' adding that the US supports 'genuine Iraqi sovereignty, not legislation that turns Iraq into an Iranian satellite state.' The proposed PMF Authority Law, currently under parliamentary debate in Baghdad, seeks to formalize the role of the PMF within Iraq's official military structure. It is backed by major Shiite factions and presented as part of Iraq's ongoing security reform process. Supporters say it is necessary to regulate the force's budget, define command responsibilities, and integrate it into the military chain of command. However, critics—both within Iraq and abroad—argue the draft would entrench the power of Iran-aligned armed factions. These groups, while operating under the PMF umbrella, have faced repeated accusations of acting independently of the Iraqi state and maintaining loyalty to Tehran. The State Department declined to comment on specific consequences should the law be passed, but warned that Washington will continue to take 'appropriate action' against financial institutions that deal with US-designated terrorist organizations. The United States has designated several factions within the PMF as terrorist groups, including Asa'ib Ahl al-Haq, Kata'ib Hezbollah, Harakat Hezbollah al-Nujaba, Kata'ib Sayyid al-Shuhada, Harakat Ansar Allah al-Awfiya, and Kataib Imam Ali. The spokesperson also voiced concern over plans by some PMF-affiliated groups to contest Iraq's next round of elections, despite pledges to disarm and transition into politics. 'We remain deeply concerned about the role of Iran-aligned militia groups operating under the Popular Mobilization Forces umbrella,' the official said. 'This includes US-designated terrorist groups and affiliated members that have targeted and killed Americans.' A political source familiar with the legislative process told Shafaq News that the bill, originally scheduled for a vote during the current session, is now facing delays due to continued disagreements within Iraq's political parties, as well as within the dominant Shiite bloc over the future structure of the PMF.
Shafaq News
4 hours ago
- Shafaq News
IED blast injures three Iraqi soldiers in southern Nineveh
Shafaq News – Nineveh An improvised explosive device detonated during a joint security operation in southern Nineveh on Wednesday, injuring three Iraqi soldiers, according to a security source. The blast struck a patrol from the Army's 43rd Brigade as it conducted a mission with Ansar al-Marjaiya forces—affiliated with the Popular Mobilization—southwest of Mosul. An investigation has been launched to determine whether the device was recently planted or a remnant of previous military activity in the area. IEDs remain a persistent threat in Iraq, especially in areas that once saw heavy fighting with ISIS. Despite territorial defeat in 2017, the group and other militant remnants continue to plant roadside bombs targeting security forces, particularly in remote or contested zones like Nineveh, Kirkuk, and Diyala. Many of these explosives are either newly laid during insurgent movements or left behind from earlier battles, posing long-term risks to civilians and military personnel alike.
