Iraqi Prime Minister Mustafa al-Kadhimi on Saturday warned of the collapse of the social and political systems in Iraq and overwhelming chaos if the country does not undergo financial reforms.

Al-Kadhimi made the statement during an extraordinary session of the Iraqi cabinet to discuss the federal budget for the 2021 fiscal year, 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.

"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 1,450 dinars per U.S dollar, an increase of 331 dinars over its previous price which was 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 coronavirus pandemic, which it said had led to a large deficit in the state budget, forcing the government to borrow money from banks to pay salaries and cover other expenses.

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 said.