Iraq initially fixed its exchange rate with only limited monetary policy, then used more and more direct controls and monetary finance under the impact of war and conflict in the 1980s and 1990s. The 2003 invasion and occupation involved several years of liberalised forex arrangements but limited and incoherent monetary policy, followed by more active and ordered use of (changes to) the exchange rate as key monetary instrument.
| Years | Targets and attainment | Classification |
| 1974-81 | exchange rate fixed to USD, no autonomous forex market;
nationalised banking system in mainly planned economy with large oil exports, central bank with very limited independence: monetary growth dominated by fiscal and oil developments, no monetary instruments in regular use but discount rate and interest rates occasionally varied, indicative credit guidelines from 1979 |
augmented exchange rate fix AERF |
| 1982-2002 | [Note: no Article IV reports between 1984 and 2004, only limited information available]
Iraq-Iran war 1980-88; Iraq invades Kuwait 1990, forced to withdraw 1991; sanctions from 1990, followed by bombing campaign from 1998; monetary policy seems to have been subordinated to war effort 1980s and then to survival in face of sanctions 1990s; no data on inflation 1979-90; official exchange rate peg unchanged 1983-2003, but Ilzetzki, Reinhart and Rogoff (2019) note multiple exchange rates 1982 and 1983, and classify exchange rate regime Jan 1982-Dec 2005 as managed float/parallel market/multiple exchange rates; Foote et al (2004) indicate inflation in 1980s mostly single-digit, but big change in 1990s with inflation volatile and often high and exchange rate depreciating rapidly, in context of very low use of banks and high use of notes and coin; King (2004) says resort to printing press from 1991 or so |
(tentative)
multiple direct controls MDC |
| 2003-6 | US-led invasion 2003, 2003-4 all policy decisions made by occupying authorities; 2005 January election for transitional assembly, April-May formation of Iraqi government; new constitution October, elections of new Parliament Dec 2005, new government April 2006;
currency reform late 2003 in context of dysfunctional banking system and central bank with few instruments; continued inflation; relatively liberal forex market with de facto peg of exchange rate to USD from May 2004 |
unstructured discretion UD |
| 2007-23 | ongoing insurgency, security problems; US troops withdrawn December 2011; ISIS insurgency takes territorial form 2014; in absence of other monetary instruments, appreciation of exchange rate parity vs USD used 2007-8 to counter rising inflation and dollarisation, then return to exchange rate stability, except for very small devaluation end-2011, small revaluation late 2015, larger devaluation end-2020, and revaluation early 2023; active parallel forex market with high premium; indirect central bank financing of government deficit and central bank lending (to private sector, in practice mainly real estate activities) initiatives from 2015; large impact of and weak policy response to Covid-19; 2021-22 political instability, prevents policy actions; oil price rises 2022 helps growth and fiscal position; 2023 central bank subsidised lending scaled back, efforts to improve liquidity management (but more needed); weak and underdeveloped financial sector (e.g. undercapitalised state-owned banks) continues to hold back economic growth and wider reform; need for significant improvement in statistical database | augmented exchange rate fix AERF |
Selected IMF references: RED 1975 pp38,40, 64-5; RED 1976 p36; RED 1983 pp22; SR 2005 pp11-12, 16-17, 18-20, 21-2, 25-6; SR 2006 pp4, 8; SR 2007, pp9-10, 16, 18; SR 2010 p10; SR 2013 pp9-10, 17; SR 2015 pp9, 16; SI 2019 pp34-42; SR 2021 pp9, 14; SR 2023 pp4-8; SRIA 2023 pp3, 9-12; SR 2024 pp4-7, 13-15, 31, 48-54.
Additional references: Foote et al. (2004); King (2004); Ilzetzki et al. (2019).
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Monetary Policy Frameworks 