Iraq Expects to Redenominate its Dinar Currency by Knocking Three Zeros Off the Nominal Value of Bank Notes

February 13, 2010 · Posted in NEWS
Iraq Expects to Redenominate its Dinar Currency by Knocking Three Zeros Off the Nominal Value of Bank Notes to Facilitate Currency Transactions, Reported Reuters, Citing a Central Bank Official

Saturday February 13, 2010
Emerging from years of war and sanctions, Iraq is trying to revamp its economy and boost oil production with a raft of crude deals that may vault it to one of the world’s top oil producers.

“The goal is to improve the payment and receiving system in the country and consequently to reform cash management,” Mudher Kasim, a senior advisor at the central bank, told Reuters.

Kasim said that the central bank expected to start rolling out new notes by the end of the year or the beginning of 2011.

An Iraqi cabinet committee ordered the change in 2007, but the central bank did not think it appropriate until recently, Kasim said. The dinar’s value will remain unchanged, he said.

Speaking to Radio Free Iraq (RFI) Mudhhir Muhammad Salih, a member of a Central Bank advisory panel, pointed out that banks are having a hard time accepting cash savings and deposits, but by dropping the zeros it will make it easier for both the banks to deal with their customers and for the general public to carry money.

Salih said some 80% of Iraq’s money supply is cash in circulation.

Salih added that in 1990 the value of banknotes in circulation was about 25 billion Iraqi dinars but is currently some 25 trillion dinars.

Economic analyst Hilal al-Tahhan told RFI that the bank’s move is overdue. He said he expects the currency change to go smoothly because of the decision to allow both the old and new banknotes to coexist, leading to less turbulence in the economy.

The local unit is managed through foreign exchange auctions, and trades around 1,170 per dollar.

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