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    Iraqi Dinar Reset The Redenomination Battle

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    Iraqi Dinar Reset The Redenomination Battle

    Post  Seck on Wed 24 Jul 2013, 15:45

    There is a growing division among investors over the fate of Iraq’s currency, the dinar. While some expect the IQD’s redenomination to lift the dinar’s value dramatically higher, others say it will have no effect on the money’s value at all.

    Iraqi politicians are equally at odds with one another, with some strongly for and others strongly against the plan. But isn’t redenomination supposed to be good for the nation’s currency? Why are they stalling?

    Opposing Views in Government

    The plan to redenominate the dinar by dropping 3 zeros off its notes has been anticipated since the Iraqi government first announced it back in 2010. The reason for the redenomination is to make transactions and accounting easier for the government, banks, and the general populace. As Shayya, an MP for the State of Law Coalition, explained to the Middle Eastern newspaper Al-Monitor:

    “The Iraqi currency is weak, and the money supply has amounted to multi-trillions because of the existence of these useless zeros. The country will witness a significant increase in oil revenues, financial earnings and high budgets. Thus, we need to print new banknotes, as estimated by the Central Bank.”

    Indeed, now that the UN has removed Chapter 7 restrictions from the nation, Iraq is fully open for business again and will see ever increasing trade over the coming years. A new currency with fewer zeros will make things so much easier.

    Yet some in the Iraqi government are reluctant to move ahead with the change, upsetting a number of redenomination advocates, including MP Nahida Daini, who lamented, “The Council of Ministers asked to delay the process for fear of money laundering operations.” Daini believes such fears are baseless, reassuring that “there are regulators in Iraq who can follow up and ensure the integrity of the project.”

    Those opposed to redenomination, though, are adamant that the Iraqi government is simply not yet ready for such a monumental task. Mudher Mohammad Saleh, former deputy governor of the Central Bank of Iraq, stessed to Al-Monitor that the deletion of zeros “does not only involve changing the design of the currency; it implies changing the economic system in the country in general.” He warned that “the decision to implement the deletion of zeros next year is very dangerous and risky” and “must be done at the appropriate time.”

    In the meantime, ruling officials would rather see the Iraqi government focus on other ways of stabilizing its currency and economy. As Magda al-Tamimi, member of the parliamentary Finance Committee, described it, “Iraq is not ready to control the possible currency fraud that may result from the deletion of zeros. The Finance Committee is now working toward controlling the Iraqi currency auction, which is witnessing a significant fluctuation in the exchange rate of the Iraqi dinar against the dollar.”

    Through these daily currency auctions, the Central Bank of Iraq issues U.S. dollars only to registered banks, importers, and other firms who need USD for conducting international transactions. By thus restricting the amount of USD circulating in Iraq, the CBI manages to control the value of the IQD, holding it at a steady rate.

      Current date/time is Sat 23 Sep 2017, 10:33