Iraq has devalued its currency as mounting financial pressure from the US war with Iran and disrupted oil exports threatens government finances, prompting opposition from lawmakers concerned about rising living costs.
The cabinet approved the measure on Tuesday following an emergency recommendation from Finance Minister Falih al-Sari and the central bank governor.
The decision took effect Wednesday, weakening the official exchange rate from approximately 1,300 to 1,500 dinars per dollar.
The devaluation follows Iraq's adoption of its 2027 budget, which projects spending of 217 trillion dinars and a deficit exceeding 40 trillion dinars.
Oil revenues finance more than 90 percent of federal spending, leaving Baghdad particularly vulnerable to disruptions in the Strait of Hormuz.
Since fighting began in late February, Iraqi oil exports have fallen sharply, at one point declining by 90 percent.
Exports reached 2.34 million barrels daily in August, compared with a prewar average of 3.6 million.
Prime Minister Ali al-Zaidi previously estimated lost oil revenue at approximately $60 billion.
Iraq has increasingly transported oil overland through Syria, although the alternative route is more expensive and less efficient.
The weaker dinar allows the government to convert each dollar of oil revenue into more local currency, potentially easing budget pressures.
Dozens of lawmakers have challenged the decision, arguing that higher import costs will disproportionately affect households already struggling with inflation and delayed government payments.
Parliament cancelled Wednesday's scheduled agenda to debate the measure, with the finance minister and central bank governor expected to face questioning Thursday.
Opposition figures, including Hassan al-Asadi and Saba al-Saadi, criticised the government's financial management and called for alternative spending measures.
The devaluation has also unsettled currency markets.
The unofficial exchange rate climbed above 1,700 dinars per dollar following the announcement, widening the gap with official rates.
Banks now sell dollars to consumers at 1,520 dinars.
Traders face potential losses on dollar-denominated import obligations, while consumers risk further price increases.
Exchange shops in Irbil reportedly closed following the announcement.
The decision reverses the currency strengthening introduced in 2023, renewing debate over whether fiscal relief justifies the economic burden on Iraqi households.