Iraq devalued its currency on Wednesday, changing the official exchange rate from around 1,300 dinars to the US dollar to 1,500 dinars.

The Central Bank of Iraq said in a statement that the new exchange rate was decided at a Cabinet meeting the previous night “to meet the relevant financial, economic and monetary requirements.”

The previous official exchange rate had been set in 2023. In practice, a gap has long existed between the official rate and the market rate offered by currency exchange shops.

That gap widened in recent months due to the US-Iran war, which has at times spilled over into Iraq, as well as disruptions to shipping through the Strait of Hormuz.

Iraq’s economy relies heavily on oil exports, most of which were transported through the strait before the war. Since the conflict began, Iraq has resorted to shipping oil overland through Syria, a route that is more expensive and less efficient.

The unofficial exchange rate had risen above 1,600 dinars per dollar before the official devaluation was announced. Following the announcement, the market rate climbed above 1,700 dinars per dollar.

Under the new official rate, Iraq’s Finance Ministry will sell dollars at 1,500 dinars per dollar, while consumers buying dollars from banks will pay 1,520 dinars.