Iraqi Dinar-IQD

The Iraqi dinar is the legal tender of Iraq. The currency code is IQD (although no international bank exchanges Iraqi dinar ). The Iraqi dinar is issued by Iraq’s federal bank, the Central Bank of Iraq.  An Iraqi dinar is subdivided in 1,000 fils, however, inflation has made it obsolete.

History

Indian rupee was the official currency in Iraq until 1932 when Iraq introduced and circulated its own legal tender. (Since British occupation of the country in World War I, Indian rupee became the official currency. The exchange was 1 dinar = 11 rupees)

After the dinar was introduced, it was pegged at par with the British pound until 1959 when, without varying its value, the peg was switched to the United States dollar at the rate of 1 dinar = 2.8 dollars.

As the currency was pegged to the U.S. dollar, dinar as like U.S. dollar was not devalued both in 1971 and 1973. As a consequence, the dinar climbed up to a value of US$3.3778, before a 5 percent devaluation reduced the value of the dinar to US$3.2169, a rate which stay put until the Gulf War, though in late 1989, the black market rate was reported at five to six times higher (3 dinars for US$1) than the official rate.

Following the Gulf War in 1991, UN sanctions were imposed; as a result, the earlier used Swiss printing was no longer available.  Subsequently, substandard quality notes issue was produced. The earlier issue became known as the “Swiss dinar” and continued to circulate in the Kurdish region of Iraq.

Amid sanctions on Iraq by the United States and the international community, Iraq encountered a high rate of inflation after excessive government printing of the new notes issue. Due to this, the dinar devalued quickly, and by late 1995, US$1 was valued at 3,000 dinars.

Since the deposition of Saddam Hussein in the 2003 invasion of Iraq, the Iraqi Governing Council and the Office for Reconstruction and Humanitarian Assistance started printing more Saddam dinar notes as a temporary solution to keep the money supply intact until new currency could be introduced.

Soon after, (between October 15, 2003 and January 15, 2004), the Coalition Provisional Authority issued new Iraqi dinar coins and notes, with latest notes being printed by De La Rue, using sophisticated anti-forgery techniques.

The authority said that new note will help creating a single unified currency that is used all through of Iraq and will also make money more convenient to use in people’s everyday lives.

Later older banknotes (carrying the image of Saddam Hussein) were exchanged for new at a one-to-one rate, except for the Swiss dinars, which were exchanged at a rate of 150 new dinars for one Swiss dinar.

As new notes were issued amid economic reconstruction (after Saddam Hussein was ousted), a new industry developed very rapidly in Iraq- selling new notes to overseas buyers.

At that moment, new Iraqi dinar was in great demand from overseas investors who expected to profit from Iraq’s new currency once the economy improved. The interim government of Iraq has considered this as legal, but the banknotes are exchanged at varied rates by companies wanting to make profit. However, as this practice turned out to be very profitable, a huge amount of Iraqi dinar was counterfeited.

Differentiating a genuine Iraqi dinar from a fake is not difficult though (for a denomination of 25,000). A genuine 25,000 Iraqi dinar note includes six different security features, if someone has to identify the authenticity of the note.

Even though the value of the dinar rose following the introduction of the new banknotes (from 4,000 dinars per U.S. dollar, at the time of their introduction, to a high of 980 dinars per dollar), the current exchange rate regime in Iraq follows a “program”, as specified by the International Monetary Fund, which is 1170 dinars per US dollar at the Central Bank of Iraq.

However, no set international exchange rate exits currently in Iraq, and, consequently international banks do not yet exchange Iraqi dinar. The exchange rate available on the streets of Iraq is around 1200 dinars per US dollar.

Speculation

On May 3, 2007, the IMF released a report concerning the economic development in Iraq, which has turned the tide in regards to speculation on the Iraq dinar. The contents of the article talk about changes made in Iraq on the economic front along with how the Iraq government had removed fuel subsidies. The article also pointed out that the Central Bank of Iraq had hiked the interest rates in an effort to allow a steady appreciation of the dinar in an attempt to fight “dollarization” of the Iraq economy.

Coins

In 1931 and 1932, coins were introduced in denominations of 1, 2, 4, 10, 20, 50 and 200 fils, seats with the 200 fils known as a rial. Denominations of 20, 50 and 200 fils were minted in silver. Later in 1953, silver 100 fils coins were introduced.

After the establishment of Republic of Iraq, a new array of coins was introduced which included denominations of 1, 5, 10, 25, 50 and 100 fils, followed by the 25, 50 and 100 fills in silver until 1969. In 1970, coins having denomination of 250 fils were introduced, followed by 500 fils and 1 dinar coins in 1982. However, from 1990 onwards the production of coins ended.

Then in 2004, new series of 25-, 50- and 100-dinar coins were introduced. However, these coins proved to be unpopular and were removed from the circulation.

Banknotes

In 1931, the government issued banknotes having denominations of ¼, ½, 1, 5, 10 and 100 dinar. All these banknotes were printed in the United Kingdom by Bradbury, Wilkinson & Co.

Between 1931 and 1947, the banknotes were issued by the Iraqi currency board on behalf of the government of Iraq and banknotes were exchangeable with pound sterling. From 1947 onwards, the banknotes were issued by the National Bank of Iraq, and later in 1954, by the Central Bank of Iraq.

The production of 100 dinars stopped in the 1940s however, the same denominations were issued and circulated until 1978, and just then 25 dinars notes were introduced.  Later in 1991, 50 and 100 dinars were introduced, which was followed by 250 dinars notes in 1995 and 10,000 dinars notes in 2002.

All those banknotes that were issued between 1990 and October 2003, along with a 25-dinars note issued in 1986, show an idealized impression of former Iraqi President Saddam Hussein. After the 1991 Gulf War, Iraq’s currency was printed both locally and in China, using inferior quality of wood pulp paper (instead of cotton or linen) along with poor quality of lithography (some notes were reputedly printed on presses designed for printing newspapers).

Meanwhile, counterfeited banknotes often appeared to be of superior quality than real notes. Despite the huge devaluation of the Iraqi dinar, the highest denomination printed until 2002 was 250 dinars. However, amid rising inflation, the Central Bank of Iraq issued a 10,000-dinars banknote in 2002. The new denomination was meant for “larger, and inter-bank transactions”.

This note was hardly ever accepted by traders or households due to fears of looting and counterfeiting. As a result, people were prompted to carry around stacks of 250-dinars notes for everyday use. The other, smaller bills were so valueless that they mostly fell into abandonment. This situation meant that Iraq, for the mainly had only one denomination of banknote in wide circulation.

Currency printed prior to the Gulf War was often called the Swiss dinar. It got this title from the Swiss printing technology that printed banknotes of a significantly higher quality than those later produced under the economic sanctions that were imposed after the first Gulf War by the U.S. and its allies.

After a transition period, this currency was abandoned by the Iraqi government. Nonetheless, this old currency still circulated in the Kurdish regions of Iraq until it was replaced with the new dinar after the second Gulf War.

During this phase, the Swiss dinar held its value, even as the new currency constantly lost value, sometimes getting devalued by 30 percent per annum.

In 2003, a series of new banknotes were issued, consisting of six denominations: 50, 250, 1,000, 5,000, 10,000, and 25,000 dinar. The notes were identical in design to notes issued by the Central Bank of Iraq during the 1970s and 1980s. A year later, on October 2004, 500 dinars note was issued. In the Kurdish regions of Iraq, the 50 dinar note is no longer in circulation.

A look at banknote features having different denominations

Swiss Dinar (Until 1990)

2003-Present