The Dinar is the official currency of Iraq. In 2003, the Iraqi Dinar (IQD) was re-introduced by the Coalition Provisional
Authority in consultation with various financial experts from Iraq and the world community.
The Dinar Currency: Features
The Dinar currency has the following features:
It can not be freely traded and is not used for any significant international transaction.
The Dinar exchange rate is determined through a daily auction that is held by the central bank along with local Iraqi banks.
Iraq derives 90% of its foreign exchange from oil exports. Hence, its economic condition and foreign exchange rate are largely determined by oil trade.
The Iraqi Dinar suffers from illiquidity due to wide variations in the price offered for it in the currency market.
Political unrest in Iraq, and subsequent volatility in the Dinar, discourages investors from investing in this currency.
Iraqi Dinar: Overview
When the Iraqi Dinar was introduced in 1932, it was equal to US$4.86. It declined to US$2.80 and remained at this figure till
1971 and subsequently appreciated to US$3.39. The Iraq war led to a fall in the value of the currency in the 1980s to US$3.22,
and sustained this exchange rate despite rising debt.
In 2003, after the Saddam Hussein regime was dissolved and the chief combat operations ended, the Iraqi economy suffered major
economic distress. This led to the introduction of the new Dinar by the US. At this point, the value of the currency was as low as
1500 Dinars to 1 US dollar. However, during early 2009, the currency appreciated to 1170 Dinars per 1 US dollar.
Iraqi Dinar and US Banks
The SOFA, or Status of Forces Agreement, was proposed in November 2008. The proposal is for the abolishment of the sale of the
Iraqi Dinar by banks throughout the world, making the export of the Dinar illegal. The government of Iraq constantly notifies
the banking institutions to stop the practice of selling the Iraqi currency.
Benefits of the New Iraqi Dinar
The new Iraqi Dinar was introduced in 2003 with a wider range of currency denominations. This facilitates more
convenient local transactions. The new currency is backed by the central government. Moreover, the adoption of a new currency is
better than dollarizing the previous currency, since the latter would hurt the Iraqi economy, which depends largely on oil exports. It is
beneficial for the Iraqi economy to have a fixed currency that is local with a smaller dollar value.
Dinar Exchange Rate: Historical Lookup
The historical Dinar exchange rates are:
1 IQD =
1998 US$0.00083330
2001 US$0.00050760
2002 US$0.00034290
2004 US$0.00070370
2008 US$0.00081360