Baghdad, Dec 20 (IANS): Iraqi Prime Minister Mustafa al-Kadhimi has warned of a collapse of the social and political systems and overwhelming chaos without a financial reform in the country.

Al-Kadhimi made his comments during an extraordinary session of the Iraqi cabinet on Saturday to discuss the federal budget for the fiscal year 2021, which came after the Central Bank of Iraq (CBI) decided to devaluate the national currency due to the economic crisis that resulted from the decline in oil prices and the coronavirus pandemic, reports Xinhua news agency.

"The political crisis in Iraq is linked to three issues: power, money, and corruption. We are working to address the crisis from an economic standpoint and with a bold decision to overcome the obstacles of corruption and money," al-Kadhimi's media office said in a statement.

Earlier in the day, the CBI decided to reduce the value of the Iraqi dinar to be 1,450 dinars per $1 in the central bank, instead of its previous price of 1,119 dinars per dollar.

The exchange rate of the dollar will reach 1,470 dinars in the local market, the statement said.

The CBI attributed the decision to the financial crisis that resulted from the decline in oil prices and the pandemic, which led to a large deficit in the state budget, forcing the government to borrow money from banks to pay salaries and to cover other expenses, according to the statement.

In a separate statement, Iraqi Minister of Finance Ali Abdul-Amir Allawi said "it has become clear that urgent reforms are needed in various economic fields, including the currency exchange rate."

"Despite the difficulty of this decision, we are forced to take such a step to address a large part of the crisis, and to ensure the protection of the Iraqi economy by achieving a brave reform step," Allawi added.