Saddam dinar with his image was introduced after the
Gulf war to replace the old currency; and swiss dinar was used in north
of Iraq. New Iraqi dinar issued on October 15th 2003 replaced its
predecessors as the national currency.
Coalition Provisional Authority (CPA) felt the need
of new currency for numbers of reasons:
lack of security and anti-fraud features in Saddam dinar. The banknotes
in circulation issued after the 1991 Gulf war were without watermark or
metal line due to technical difficulties. That was the major reason for
only two denominations of Saddam's dinar notes 250 & 10,000 and
there were no coins which cause transaction problem.
was uniformity of currency all over Iraq.
reason was economic stability. In April 2003, following the end of major
combat operations; Iraqi economy was in distress because of closure of
oil sales, imposition of UN sanctions. At that time United Sates
officials said that a new currency was needed, to introduce some
stability without a proper currency in circulation there was a fear of
inflation. The US decided to distribute $20 bills to the civil servants
to boost the economy. This was not an issue of "dollarizing"
the economy but to get money that had real value into people's hands.
—In the long
run, Washington wanted the new Iraqi government to pick its own
currency, as Afghanistan adopted a new one after the fall of the Taliban.
Keeping in consideration all the above mentioned
reasons and problems, the administrator for CPA in Iraq, Paul Bremer
announced that the CPA would print and distribute new banknotes for
Iraq. The key Iraqis, including officials at the Iraqi Central Bank as
well as leaders of the autonomous regions in northern Iraq were
consulted on this issue and fully supported this decision.
CPA officials selected Britain's De La Rue Pic to
lead the work, without allowing competitive bids from other companies.
The company led a consortium of global currency specialists to
manufacture the banknotes. De La Rue is the world's largest commercial
security printer and papermaker, involved in the production of over 150
national currencies and a wide range of security documents such as
travelers cheques and vouchers. Thomas De La Rue began printing British
postage stamps in 1855 and also obtained the contract for all Indian
The new currency has six denominations of 50, 250,
1000, 5000, 10000 and 25000 dinar notes to make it more convenient for
transaction. The new notes are not only of higher quality and durability
but also have many anti-fraud features that provide essential
The image of Saddam was eliminated and new banknote
of 10,000 includes pictures of Abu Ali Hasan Ibn al-Haitham (known as
Alhazen). He is said to have 'invented' the camera obscura. Also, an
eminent physicist and mathematician he developed analytical geometry by
establishing linkage between algebra and geometry. The US treasury has a
strong dinar policy and is working with the CPA to reinstate a strong
decentralized banking system in Iraq.
The conversion rates for new Iraqi dinars with the
previous dinars as:-
"old dinar" exchanged for one new Iraqi dinar.
"swiss dinar" exchanged for 150 new Iraqi dinar.
is also convertible into other currencies at the prevailing market
The new Iraqi dinar is also available in the money
markets of Pakistan. People are investing heavily in this new dinar with
the hope of heavy returns. Because the potential investors have seen the
stability of Afghani currency but in case of dinar they are expecting
significant growth. In 1990's, when Iraq was an economic leader in its
region, Iraqi dinar worth was an outstanding $ 3.20 (US dollar). The
governor State Bank of Pakistan Dr. Isharat Hussain has said that the
new Iraqi dinar may crash/drop in its exchange value and warned the
people to avoid buying it for investment point of view.
Whenever someone invests in currency, the risk is
there like other businesses which arise from uncertainty about the
future. This perception of risk is often defensive, anticipating
negative rather than positive outcomes.
Political events disrupt businesses and affect on
their profits, for example wars and similar disturbances. The invasion
of Kuwait by Iraq in 1990 followed by the Gulf War in 1991 affected many
businesses adversely. Now, the situation is much like that and political
risk is very high because of the continued clashes between insurgents
and security forces.
Currency risks for organizations/individuals
involved, directly or indirectly in international trade and finance
exchange rates are volatile, in both the short and long term.
future movements in exchange rates can't be predicted accurately.
The following graphs show the trading range in the
Saddam/Swiss dinar, swiss dinar/dollar and exchange rates & regime
change in Iraq within a typical period.
Iraq is a uniquely attractive place to do business in
a central Middle East location. It has rich agricultural and abundant
natural resources including oil. Iraq has bright and hardworking people
(close to 25 million population) with demand for goods and services they
have been unable to purchase for years. The provisional government has
also set up.
The new foreign direct investment law permits
investment by foreigners with very few restrictions. It permits foreign
investors now to own up to 100% of enterprises in all sectors except
natural resources. Iraq also recently passed a new banking law
permitting six international banks to begin providing credit and other
banking services. The country is currently establishing a new set of
commercial laws to assure investors of enforceable property and other
rights, bankruptcy protection, foreclosure capability and a
well-functioning judicial system for settling commercial disputes. Taxes
and tariffs are low. Iraq has a flat 5 percent tariff.
Oil and related businesses dominate the economy in
Iraq. The heaviest infrastructure investments in future are likely to be
in electric power, oil production, refining, distribution and water
treatment. Industries such as cement, aggregates and other construction
materials are expected to do well.
As we know, Iraq floats over a lake of oil and its
reserves are sufficient to feed the world's need for decades to come. We
too, like so many other forward-thinking investors believe that there is
great potential for this country to expand. Therefore it is great
opportunity to invest in new Iraqi dinar.
The investment potential with the Iraqi dinar is quit
high. Many researchers believe that the dinar's value will stabilize
even some experts said that it will grow upto $1 (USD). But time and
patience constraints are there.