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Iraq Business
a day ago
- Business
- Iraq Business
Iraqi Dinar Q&A: RV Prospects Two Weeks on from Airstrikes on Iran
By Guest Blogger. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News. Q: Following your recent article on the Dinar Revaluation (RV) and Israeli Airstrikes on Iran, the situation in the region has progressed. What is your current assessment as it relates to the dinar (IQD)? A: It has now been two weeks since the initial Israeli airstrikes on Iran, and the situation has continued to evolve. While a US-brokered ceasefire was announced on 23rd June, following a 12-day conflict that saw exchanges of missile and drone attacks, the broader implications for Iraq and the Iraqi Dinar's potential revaluation remain complex and largely negative. Here's a follow-up based on the latest developments: Lingering Instability and Uncertainty Despite the ceasefire, the underlying tensions between Israel and Iran persist, and this continued regional instability is a significant factor for Iraq. While Iraq itself largely avoided direct involvement in the recent fighting, its geographic proximity means it remains highly susceptible to any fallout. Political and Security Concerns: The conflict highlighted the potential for regional power struggles to spill into Iraq, impacting its already fragile domestic stability. There have been reports of continued efforts to manage the influence of Iran-aligned Iraqi groups, and the risk of renewed hostilities involving these groups remains. The conflict highlighted the potential for regional power struggles to spill into Iraq, impacting its already fragile domestic stability. There have been reports of continued efforts to manage the influence of Iran-aligned Iraqi groups, and the risk of renewed hostilities involving these groups remains. Economic Vulnerability: Iraq's economy, heavily reliant on oil exports, is particularly vulnerable. While there was a short-term rise in oil prices during the conflict, which generated some additional revenue, this was largely offset by increased import costs due to disruptions in maritime insurance markets, global price fluctuations, higher shipping expenses, and a decline in air transport and religious tourism. An Iraqi government adviser described the conflict's impact as a "double-edged shock," leaving the Iraqi economy in a state of "neutral uncertainty." Dinar Under Pressure The Iraqi Dinar has continued to face headwinds, largely due to the pervasive uncertainty and ongoing economic challenges. Dollarisation and Parallel Market: The increased regional tension has reinforced the demand for the US dollar as a safe haven. While the official Central Bank of Iraq (CBI) rate remains stable at 1,320 IQD to $1, the parallel market has seen fluctuations. Recent reports indicate that USD/IQD exchange rates have edged lower in Baghdad and Erbil, with selling prices for $100 ranging from 141,750 IQD to 142,250 IQD, still significantly above the official rate. This persistent gap is a clear indicator of market pressure and a lack of confidence in the Dinar. The increased regional tension has reinforced the demand for the US dollar as a safe haven. While the official Central Bank of Iraq (CBI) rate remains stable at 1,320 IQD to $1, the parallel market has seen fluctuations. Recent reports indicate that USD/IQD exchange rates have edged lower in Baghdad and Erbil, with selling prices for $100 ranging from 141,750 IQD to 142,250 IQD, still significantly above the official rate. This persistent gap is a clear indicator of market pressure and a lack of confidence in the Dinar. Smuggling Concerns: The issue of dollar smuggling to Iran, aimed at circumventing US sanctions, continues to plague Iraq's financial system. This illicit flow of currency further limits the CBI's ability to effectively manage the Dinar's value and build confidence for a revaluation. The issue of dollar smuggling to Iran, aimed at circumventing US sanctions, continues to plague Iraq's financial system. This illicit flow of currency further limits the CBI's ability to effectively manage the Dinar's value and build confidence for a revaluation. Budgetary Challenges: Iraq is facing significant fiscal strains, with the 2025 federal budget unlikely to be submitted to Parliament anytime soon. This delay is attributed to "severe financial deficits, unstable revenue streams, the absence of a coherent economic vision, and the looming legislative elections." A parliamentary finance committee member noted a budget deficit of nearly 80 trillion IQD (approximately $61 billion), which puts immense pressure on government spending and the overall economic outlook. Delays in the budget can directly impact public salaries and infrastructure projects, further dampening economic sentiment. Outlook for Revaluation Given these ongoing developments, the prospect of an Iraqi Dinar revaluation in the near future appears highly improbable. The confluence of factors including: Continued regional instability and potential for escalation. Persistent demand for the US dollar and challenges in the parallel market. Ongoing issues with dollar smuggling and US sanctions. Significant internal budgetary deficits and political uncertainty within Iraq. all contribute to an environment that is not conducive to a revaluation. While Iraq's vast oil reserves are a long-term asset, the immediate economic and geopolitical landscape presents too many hurdles. The Iraqi government's focus is currently on managing the existing economic challenges and navigating the complex regional dynamics, rather than pursuing a revaluation. For more information on the Iraqi dinar, check out IBN's Dinar Page here:
Iraq Business
13-06-2025
- Business
- Iraq Business
Iraqi Dinar Q&A: Dinar Revaluation (RV) and Israeli Airstrikes on Iran
By Guest Blogger. Any opinions expressed are those of the author(s), and do not necessarily reflect the views of Iraq Business News. Q: What effect will Israel's airstrikes on Iran have on any potential revaluation of the Iraqi dinar? A: This week's Israeli airstrikes on Iran, targeting nuclear and military sites, will likely have a negative effect on any potential revaluation of the Iraqi Dinar, at least in the short term. Here's why: Increased Regional Instability The conflict between Israel and Iran is a major source of instability in the Middle East. Iraq, being a direct neighbour to Iran and having complex political and economic ties with both countries, is highly susceptible to the fallout from such tensions. Increased regional conflict generally leads to capital flight and a preference for safer currencies like the US dollar, which puts downward pressure on local currencies like the Iraqi Dinar. Safe-Haven Demand for USD As investors and even ordinary citizens become more apprehensive about the future, they tend to move their assets into more stable and liquid currencies. The US dollar is traditionally seen as a global safe-haven currency. This increased demand for USD in Iraq would further weaken the Dinar against the dollar in the parallel markets, making any revaluation less likely. Impact on Oil Prices While a spike in oil prices due to regional conflict might seem beneficial for an oil-dependent economy like Iraq's, the immediate effect on the Dinar is often outweighed by the increased instability. Furthermore, if the conflict were to escalate and impact shipping routes like the Strait of Hormuz, Iraq's oil export revenues could be severely affected, which would be detrimental to the Dinar. Smuggling and Sanctions Concerns Iraq has faced challenges with dollar smuggling to Iran, partly due to US sanctions on Iran. Escalated tensions and potential new sanctions could exacerbate these issues, further disrupting Iraq's financial system and the Dinar's stability. Political and Economic Uncertainty in Iraq The Iraqi Dinar's value is already influenced by a range of internal factors, including political stability, government spending, and efforts to control corruption. Regional conflicts add another layer of uncertainty, making it harder for the Central Bank of Iraq to manage the exchange rate and implement policies that could lead to a revaluation.
Iraq Business
09-06-2025
- Business
- Iraq Business
Tabaqchali: Humongous Dividends Boost the Iraqi Market
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 . "Humongous Dividends Boost the Market" The market, as measured by the Rabee Securities U. S. Dollar Equity Index (RSISX USD Index), closed at an all-time high for May, with an increase of 0.7%, and is up 4.0% for the year. However, there is more to the Index's 0.7% increase than meets the eye due to the nature of the index's market value-weighted calculation that incorporates stock price changes, but not dividends, that negatively affected the index's monthly performance far more than in the prior years. The culprits were two humongous dividend announcements of 14.5% and 11.5% by two of its ten components, the Bank of Baghdad (BBOB) and Asiacell Communications (TASC), respectively, with a 28.6% and 10.6% index weighting at the end of April. If these two dividends, as well as another component's 0.3% dividend, were incorporated in the index's calculations, then it would have been up 6.4% for the month. Preceding TASC's and BBOB's dividend announcements, a few weeks earlier was the National Bank of Iraq (BNOI), another major component of the index with a 22.3% weighting at end of April, which declared a 4.9% per share cash dividend and a 30% share dividend. The combination was effectively equivalent to a 12.3% dividend yield. The two bank's oversized dividends follow from the outstanding earnings and book value growth enjoyed by the top banks in the country over the last two years, as reported here in "Banks End a Second Year with a Bang", in which the earnings two-year compounded annual growth rate (CAGR) was 203% for BNOI and 104% for BBOB (table below). For TASC, its dividend increased by 50% year-over-year, from Iraqi Dinar (IQD) 1.0 to IQD 1.50 per share, with the dividend payout ratio increasing to 118% from 88%, reflecting the ongoing growth in the company's earnings over the last two years with a 22% CAGR (table below), and its cash generating model that resulted in the build-up of huge reserves over the last few years. The market, while expecting such a high dividend, nevertheless received it enthusiastically on the day the stock went ex-dividend. According to the Iraq Stock Exchange (ISX) trading regulations, the ISX sets the stock lower by the amount of the dividend payout on the ex-dividend date; in other words, it lowered the stock's price by IQD 1.50, yet this was completely reversed, on a high trading volume, with the stock ending at the same price that it was before it went ex-dividend. As such, effectively rallying 13% versus the ISX's ex-dividend price adjustment. Promisingly, it increased by a further 3% again on high trading volumes by month's close, in the process reflecting the market's expectation for further strong earnings growth for the company, and continued high dividends. Earnings and Book Values for Selected Companies ( Source: Rabee Securities, company reports, and AFC Research. Unaudited data as of end 2024* ) The backdrop to the strong growth enjoyed by the country's top companies, as reflected in declared dividends, stems from the relative stability that the country enjoyed over the last few years; that provided a stable and predictable macroeconomic framework for businesses and individuals to operate in and to plan for capital investments on a scale not seen in the prior decades of conflict. The stock market's upside potential in discounting these developments was the focus of a recent report, "Investing in Iraq, yet more gain to come" by Undervalued Shares " itself a second report on Iraq after the initial report four years ago, with the RSISX USD index increasing by 179% between the two reports, i.e. between June 2021 and May 2025. The over-arching theme, as discussed in "What Next After Two Gangbuster Years?" is that both of the two key dynamics discussed here in the past -the cumulative positive effects of the relative stability and structural banking developments- are in the early stages of their transformation of the Iraqi economy, a process that would unfold over the next few years, bringing with it high economic growth that would feed into higher corporate earnings, and ultimately higher stock market returns. Nonetheless, as discussed last month in "Market at an All-time High, Oil Prices Crashing, What Gives?", the negative effects of lower oil prices on the economy will become a headwind, reversing the positive tailwind of the past two years. Yet, the secular positives of the economic transformation should overcome the drag from the cyclical negatives and thus continue to drive the market's direction. The equity market, as measured by the Rabee Securities U. S. Dollar Equity Index (RSISX USD Index), having surpassed its 2014 peak by 11.1% by the end of May, has the potential to rally further reflecting the powerful dynamics discussed here over the last few months. However, risks remain given Iraq's recent history of conflict, extreme leverage to volatile oil prices, especially in the current uncertain global environment, as well as the risk that a widening of the current Middle East conflict will not be contained and evolve to destabilise the region. Notes: * Using unaudited quarterly data, and earnings are net profit after tax. IBSD's net profit for 2024 is arrived at after accounting for the company's tax rate. 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 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.
Iraq Business
28-05-2025
- Business
- Iraq Business
Dinar-Dollar Volatility: Seasonal and Structural Factors
By John Lee. A report by the Future Iraq Institute for Economic Studies and Consultations reportedly highlights significant fluctuations in the exchange rate of the Iraqi Dinar (IQD) against the US Dollar on the parallel market over the past two decades, driven by a mix of seasonal, political, and macroeconomic factors. Key factors cited in the report include: Timing of national budget releases; Public holidays in major trading countries, especially China and Iran; Dollar sales by the Central Bank of Iraq (CBI); Political developments and financial policy changes; Geopolitical disruptions affecting foreign currency demand. Click here to read report from Shafaq. (Source: Shafaq) Tags: Central Bank of Iraq (CBI), cg, Dollar, exchange rate, featured, foreign exchange, forex, Future Iraq Institute, inflation, IQD, Iraqi Dinar News
Shafaq News
18-05-2025
- Business
- Shafaq News
USD/IQD exchange rates inch lower in Baghdad, rise in Erbil
Shafaq News/ On Sunday, the US dollar exchange rates decreased against the Iraqi Dinar in Baghdad, while inching higher in Erbil, as trading closed for the day. According to a Shafaq News survey, al-Kifah and al-Harithiya central exchanges registered a rate of 142,350 IQD per $100, compared to 142,450 IQD earlier in the day. Local exchange shops in Baghdad recorded selling prices of 143,500 IQD and buying at 141,500 IQD per $100. In Erbil, the selling rates rose to 142,450 IQD and the buying rates to 142,200 IQD per $100.
