Is the debtor obligated to repay the loan amount ($1000) in dollars, or to repay it in local currency at the exchange rate at the time of receiving the loan, knowing that the value of the dollar has changed, which may harm the lender?

The principle governing the fulfillment of fixed debts is based on like for like; meaning, the debtor pays one thousand dollars if the debt was one thousand dollars. The value of the debt at the time of repayment is not taken into consideration.

Therefore, a debt is repaid with its like, and this is the view of the majority of scholars. It is preferable for the borrower to be generous with the lender, based on the Prophet's (peace be upon him) saying: "Indeed, the best among people are those who are best in paying off their debts."

If both parties agree at the time of repayment to settle the debt in a currency other than the dollar, there is no harm in that, provided that it is at the exchange rate of the day of repayment and that they do not separate while there is still something between them, based on the Hadith of Abdullah ibn Umar (may Allah be pleased with them both): "There is no harm in taking them at their daily price as long as you do not separate while there is still something between you."