Iraqi dinar

Iraqi dinar. The official currency of Iraq, issued by the Central Bank of Iraq. It was introduced in 1932, replacing the Indian rupee which had been the official currency during the British Mandate for Mesopotamia. The dinar's value and design have undergone significant transformations, heavily influenced by the country's turbulent political and economic history, including the Iran–Iraq War, the Gulf War, and the 2003 invasion of Iraq.

History

The currency was first established following the independence of the Kingdom of Iraq, with initial banknotes printed by the British Bank of the Middle East. The monetary system remained relatively stable until the Ba'ath Party rise to power and the subsequent rule of Saddam Hussein. During the international sanctions in the 1990s, the government issued a separate currency, known as the "Swiss dinar," in the Kurdistan Region, while the rest of the country used newly printed notes that rapidly depreciated. Following the 2003 invasion, a new unified dinar series was introduced to replace both existing currencies, a complex process managed by the Central Bank of Iraq under the authority of the Coalition Provisional Authority.

Coins and banknotes

Coins, denominated in fils and dinars, were historically in circulation but saw little use after the Gulf War due to inflation. Modern banknotes form the primary circulating medium, with a series introduced in 2003 featuring iconic Iraqi landmarks and cultural symbols. These include the 250-dinar note depicting the Dukan Dam, the 1000-dinar note showing a gold dinar from the Abbasid Caliphate era, and the 25,000-dinar note featuring the portrait of the 13th-century scholar Ibn al-Baitar. Earlier series, particularly those bearing the image of Saddam Hussein, were demonetized. The current notes are produced with advanced security features by specialized printing companies like De La Rue and Giesecke+Devrient.

Exchange rate and revaluation

Historically pegged to the British pound sterling and later the United States dollar, the dinar's fixed exchange rate was abandoned after the Gulf War, leading to severe devaluation. A major policy shift occurred in December 2020 when the Government of Iraq, advised by the International Monetary Fund, announced a dramatic revaluation, changing the official rate from IQD 1,182 to 1,450 per United States dollar. This devaluation, one of the largest in the nation's modern history, was intended to address a severe liquidity crisis exacerbated by low oil prices and the economic impact of the COVID-19 pandemic. The exchange rate is now set by the Central Bank of Iraq through a daily currency auction, a system closely monitored by the U.S. Treasury Department.

Economic impact

As an oil-dependent economy, Iraq's foreign exchange reserves and the dinar's stability are intrinsically linked to global crude oil prices. The 2020 devaluation aimed to reduce a massive budget deficit and preserve foreign currency reserves but also triggered a sharp increase in inflation, affecting the cost of imports and living standards for citizens. The currency's weakness has complicated trade relations with neighboring countries like Iran and Turkey, and impacts the operational budgets of numerous international organizations and contractors working within Iraq, including those associated with the United States Department of Defense.

Counterfeiting and security features

Counterfeiting has been a persistent challenge, especially following the chaos of the Iraq War and the proliferation of older note designs. The Central Bank of Iraq employs multiple security features in its modern banknotes to combat this, including holographic strips, watermarks of historical figures like Avicenna, color-shifting ink, and raised intaglio printing. The Iraqi Police and Ministry of Interior often collaborate on investigations into counterfeit rings. These security measures are periodically upgraded, informed by expertise from international partners and firms like the Banknote Corporation to stay ahead of forgery techniques.

Category:Economy of Iraq Category:Currencies of Asia