New Dinars for Old
At the end of last month, a spokesman for the Central Bank of Iraq (CBI) told reporters that a plan to redenominate the Iraqi dinar will be presented to the Council of Ministers in the near future. (See here and here.) The Council is then expected to submit the relevant legislation to Parliament for a vote. If the lawmakers approve the project, all existing banknotes will be replaced with new currency at the rate of 1,000 old dinar for one new over some unspecified period of time.
Given Parliament’s current backlog, this change can hardly be imminent. Still, you might think they could get around to voting on the CBI’s proposal some time before the end of this year. In that case, the redenomination could presumably be completed by the end of 2012.
The process will necessarily involve both the exchange of new banknotes for old and the restatement of contractual obligations in terms of the new currency. Among other things, three zeros will have to be eliminated from the share capital of the ISX listed companies as well as from the number of shares each has outstanding. (This will keep the par value at one dinar.)
I’m told this should be a relatively straightforward change for the depository center to make. Trading should not have to be suspended for more than a few days and it may be possible to proceed in phases of a few names at a time so that the entire market does not have to shut down during the transition period.
Similarly, it seems reasonable to expect the CBI to exchange new dinars for US dollars at one thousandth the rate for old dinars. In other words, if the original rate were IQD 1170 = US$ 1, post-redenomination this would become IQD 1.170 = US$ 1.
All of this seems reasonably straightforward for anyone holding assets such as currency or shares inside the country. For those holding dinar cash outside Iraq, however, things may not be so simple. How and on what terms their old dinars will be convertible into the new currency remains an open question.
Iraq Prepares to Redenominate its Currency
According to a report from Al Sumaria News, Iraq’s Central Bank announced on Thursday that it is planning to delete the zeros from its currency, the Iraqi dinar.
This step is one of the bank’s strategic missions, the Central Bank said adding that the new currency will include the Kurdish language in addition to the Arabic language.
“The zeros that were added to the Iraqi currency previously constituted a large money supply up to 28.500 trillion Iraqi Dinar and 5 trillion banknotes”, the adviser of Iraqi Central Bank governor Mothahhar Mohammed Saleh [Mudher Mohammed Saleh] told the agency.
“The Central Bank has prepared all requirements needed to delete the zeros from the Iraqi Currency”, Saleh said.
“This step is one of the Iraqi central bank’s strategic missions. The monetary policy of the bank aims to structure and reduce the currency in a country moving towards an economic phase”, he added.
“The project of deleting zeroes is complete. It will be submitted to the central bank’s administration in the next session. Then, it will be passed to the ministerial council before presenting it to the Parliament for vote. The mechanisms of changing the currency will be gradual. It will be preceded by awareness campaigns for citizens”, the adviser of Iraqi Central Bank governor said.
“The new currency will be printed after deleting the zeros and will include the Kurdish language in addition to the Arabic language. It will also bear photos of Iraq’s civilization in addition to symbols of Iraqi intellectuals and figures”, Saleh noted.
Sanan Al Shebeibi [sinan Al-Shabibi], Governor of Iraq’s Central Bank, affirmed during the meeting of independent commissions on June 19 with Prime Minister Nuri Al Maliki that the bank is preparing all requirements needed to replace the Iraqi Currency.
Iraq’s Central Bank has four branches including Basra, Sulaimaniah, Erbil and Mosul. It was founded as an Iraqi independent bank by virtue of Iraq’s Central Bank Law issued on March 6, 2004.
The bank is responsible for the prices stability and the implementation of monetary policy including exchange rates, the management of foreign reserves, the issuance of currencies and the organization of the banking sector.
It’s six years since neighbouring Turkey redenominated its currency, making one ‘new Turkish lira’ equal one million ‘old Turkish lira’.
Link: http://www.iraq-businessnews.com/?s=zeros& also there are other interesting articles on the same page.