Iraqi Dinar Revaluation (Currently IQD 1,000 is worth around €0.60 and US$0.85 ... ~ Too many zeroes: iraq plans to change currency

[RV4LIFE]

April 27, 2011

Too many zeroes: iraq plans to change currency

The Iraqi government plans to chop three zeroes off the national currency. It should make transactions easier and enhance the exchange rate. But local economists are not sure the country is ready.

Recently the Iraqi government announced that they were close to completing plans for re-denomination. Three zeroes will be removed from Iraq’s currency, the Iraqi dinar or IQD, and old banknotes will gradually be phased out. For example, this would make an IQD 1,000 note into an IQD 1 note. Currently IQD 1,000 is worth around €0.60 and US$0.85.

Logically speaking, re-denomination does not change the value of a currency nor should it cause inflation. It should make currency easier to use and increase its credibility. Re-denomination may also be a matter of political expedience.

For example, when Turkey announced a re-denomination in 2005, the country’s central bank explained that extra zeroes on their banknotes meant “problems in accounting and statistical records, data processing software and payment systems”, adding that the move to cut them was “psychologically and technically essential”.

Re-denomination can usually only be undertaken once inflation is under control and over the last few years, inflation in Iraq has dropped from over 30 percent to single digits. Nonetheless Iraqi opinions about the planned change remain divided.

Qasim Jabbar, an economic researcher, is concerned about the psychological impact the removal of three zeroes will have on locals. Additionally Jabbar does not think the time is right. “We must create a stable environment in political, economic and legal terms, in order to control the conditions during the transition period to a new currency,” he explained. “This is necessary in order to ensure that the transition is not manipulated by government departments and in society in general, where there is rampant corruption.”

Jabbar was also worried about the absence of a central authority that was truly capable of controlling the Iraqi currency market. He believed that the psychological problem will be people “focusing on the change in numbers, rather than in real value”. By rights, re-denomination should not impact the actual value of a currency; it should still buy the same goods as it did before for the same prices. “But a person with IQD 10 million will feel they have lost a fortune when the zeros are removed,” he noted.

Re-denomination is nothing new. “Many countries, such as Turkey and Germany, have also taken this step,” another Iraqi economist Kareem al-Halfi said. “But this doesn’t mean that the Iraqi experience will be like that, of those nations. Iraq has serious structural problems and high rates of unemployment. These problems cannot be solved in the short term and we need to create the economic conditions necessary to allow re-denomination.”

According to Mothahhar Mohammed Saleh, an advisor to the Central Bank of Iraq, which was established in 2004 to administer monetary policy in Iraq, the impact of re-denomination could have both positive and negative effects.

Firstly, a reduction in the large amount of currency in circulation – there is an estimated IQD 27 trillion in circulation – could have a negative impact on everyday transactions, he said. For example, one previously recorded impact in other countries has included the rounding up (or down) of prices due to re-denomination.

On the other hand, the currency will become far easier to use. “In the wholesale sector, goods are being traded using US dollars.” This process is known as “dollarization” and occurs when a country uses a foreign currency, in parallel to or instead of, its own currency because it is seen as more stable and subject to fiscal disciplined.

Anyway, according to Saleh, “this change will not be introduced hastily. It will only be introduced when inflation is under control - and after parliament and the Iraqi cabinet has gone through legislation thoroughly. They will then decide how the [re-denomination] law will be implemented.”

As Saleh said, “the Central Bank is proceeding cautiously in this matter because it realizes re-denomination could cause economic problems if implemented in haste.”

The IQD was first introduced in the early 1930s and was pegged first to the British pound, then the US dollar. After Iraq’s invasion of Kuwait, under the leadership of Saddam Hussein, strict economic sanctions saw the value of the IQD drop. By the mid-1990s, IQD 3,000 was worth around one US dollar.

In order to make purchases in Iraq, huge amounts of cash were needed. An IQD 25 note was the highest denomination available so to make life easier, the government introduced an IQD 250 note. After the American-led invasion in 2003, the Iraqi government issued even more notes with higher values. IQD 25,000 notes were now the highest value.

The average person on the Iraqi street said they would be happy to see the IQD stabilize further. But they are also afraid that the lopping off of zeroes will have a negative impact.

Baghdad merchant Abdul Amir trades in food products and when he deals with wholesalers he prefers to use US dollars because then he doesn’t have to carry as much paper around. “Large transactions require millions of Iraqi dinar. If I use foreign currency, I don’t need as much,” he explained. “But when it comes to daily transactions, I don’t mind using the dinar.”

As to his thoughts on the planned re-denomination, Amir had only questions: “Would there be a loss expected? Would the market be controlled to guarantee its stability?” he asked.

Government employee Sabah Daoud raised further questions: “Would the Iraqi dinar rise against the dollar? Would my salary be worth the same, with and without the zeroes?” He wanted to see more research on the impact of such a step on the average Iraqi citizen.

Currently the Iraqi government seems set on losing the extra zeroes, those digits that have become such a burden on the dinar. But the road toward this goal is a difficult one. And it is just one stop along an even longer road, the one leading toward prosperity and steady, stable economic growth for Iraq.

Niqash: briefings from inside and across Iraq ~ http://www.niqash.org/content.php?contentTypeID=28&id=2826〈=0

[Tropics]

You are posting articles that have already been posted.

[MarchMadnes]

Must be the paid LOPPER LOL! I have to say I will be the thorn in LOPS side until we see the true RV dont let this sell you. LOP wont happen to much rides on this for it to lop!

If this truly happens which many of us dont believe this will prove how corrupt the govt is since all the things that have been paid for Iraq! As well do they really want to create another war. I will say this happens good bye USA we are screwed which we hope since our govt has a big hand in this dont fool yourself thinking they dont but hopefully they dont allow this word most of us dont believe LOP which how can this guy call hyperinflation when inflation is only 5.7% based on what Shabibi said? Some more lies we gather since it has to be in the 100s if not 1000s of % inorder to LOP! Maybe just another excuse to prove how corrupt this whole thing is! If this happens I feel sorry for the guy who sat here for 6 years or more! What a joke! Dont believe in this article its just like the ministers would be seated over and over and never did so this seems to be more smoke!

[Halo9678]

Maybe it's just me but Iraq would be in a orld of hurt, not that they aren't now but..., if they RV'd less than a dollar. Especially considering the dollars RAPID free fall. Yes, Iraq needs to enter the market at a rate that won't shock the global market but they don't need to economically curse themselves either. Think about it, if the dollar is falling and you are trying to rise, why peg yourself to a falling currency? Everyone knows that Iraq is the world's "Wild, Wild, West" and some can remember the large boons the gold rush granted. I don't thinnk Iraq should sell themselves short. However, time for their protections is running out and I don't think Iraq is formidable enough to repel all of its' debtors. Heaven forbid all debtors come collecting at the same time... Iraq could wind up being a sovereign surrogate to the West. Yeah, that will go over well...

[Ore]

Must be the paid LOPPER LOL! I have to say I will be the thorn in LOPS side until we see the true RV dont let this sell you. LOP wont happen to much rides on this for it to lop!

If this truly happens which many of us dont believe this will prove how corrupt the govt is since all the things that have been paid for Iraq! As well do they really want to create another war. I will say this happens good bye USA we are screwed which we hope since our govt has a big hand in this dont fool yourself thinking they dont but hopefully they dont allow this word most of us dont believe LOP which how can this guy call hyperinflation when inflation is only 5.7% based on what Shabibi said? Some more lies we gather since it has to be in the 100s if not 1000s of % inorder to LOP! Maybe just another excuse to prove how corrupt this whole thing is! If this happens I feel sorry for the guy who sat here for 6 years or more! What a joke! Dont believe in this article its just like the ministers would be seated over and over and never did so this seems to be more smoke!

The 5.7% inflation is accurate, but that is inflation GROWTH or CHANGE, from one month to the next. That is not the total amount of inflation.

Real inflation is determined by a country's currency, and how many units of that currency it takes to buy whatever good or products. For example, I could rent a 1 bedroom apartment in Iraq for $500 usd, but that would cost 585,000 iqd (per month), or buy a loaf of bread for $.086 usd or 1000 iqd. That is HYPERINFLATION that THEIR currency is experiencing, yet some people like you do not grasp this. Obviously, it all related to the value of their currency. Why do you think there are talks about the U.S. about to, or already experiencing HYPERINFLATION? Its because our currency, the USD, has lost over 30% within the last 2 years, therefore, it will take more USD to buy the same goods, than it did 2 years ago. HYPERINFLATION is not about overcharging for goods or products, its about rising prices based on the lost value of a currency, so that the same previous value of the product of good could be obtained, because it will simply take more units of the currency to make up the value it had before....

[rsskelton]

The 5.7% inflation is accurate, but that is inflation GROWTH or CHANGE, from one month to the next. That is not the total amount of inflation.

Real inflation is determined by a country's currency, and how many units of that currency it takes to buy whatever good or products. For example, I could rent a 1 bedroom apartment in Iraq for $500 usd, but that would cost 585,000 iqd (per month), or buy a loaf of bread for $.086 usd or 1000 iqd. That is HYPERINFLATION that THEIR currency is experiencing, yet some people like you do not grasp this. Obviously, it all related to the value of their currency. Why do you think there are talks about the U.S. about to, or already experiencing HYPERINFLATION? Its because our currency, the USD, has lost over 30% within the last 2 years, therefore, it will take more USD to buy the same goods, than it did 2 years ago. HYPERINFLATION is not about overcharging for goods or products, its about rising prices based on the lost value of a currency, so that the same previous value of the product of good could be obtained, because it will simply take more units of the currency to make up the value it had before....

The dictionary defines hyperinflation as: Inflation that is out of control. I certainly respect your opinion Ore, but I really don't think Iraq is having that problem. But thats just me.

[skepticaldinar]

The dictionary defines hyperinflation as: Inflation that is out of control. I certainly respect your opinion Ore, but I really don't think Iraq is having that problem. But thats just me.

RS, you are in B-ham aren't you? Did you receive any major damage?

[Ore]

The dictionary defines hyperinflation as: Inflation that is out of control. I certainly respect your opinion Ore, but I really don't think Iraq is having that problem. But thats just me.

Right. Hyperinflation is extreme or excessive inflation; but what is inflation?

*Inflation

–noun

1.

Economics . a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation).

Here is the a chart of the inflation rates CHANGE of Iraq in the past 10-11 years: http://www.indexmundi.com/iraq/inflation_rate_%28consumer_prices%29.html

and here: http://www.indexmundi.com/g/g.aspx?c=iz&v=71

NOTE: at the bottom of each chart, it states: "This entry furnishes the annual percent change in consumer prices compared with the previous year's consumer prices."

They were already "in the hole", experiencing excessive inflation (Hyperinflation) since the 1990's. It has just recently been brought down, hence the need to change and introduce a new currency. Countries that redenominate, lop, their currency, virtually always do so AFTER they have stabilized or reduce the inflation (from Hyperinflation), because the currency that was needed during the hyperinflation is not as convenient anymore.

[tjfoz]

Right. Hyperinflation is extreme or excessive inflation; but what is inflation?

*Inflation

–noun

1.

Economics . a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation).

Here is the a chart of the inflation rates CHANGE of Iraq in the past 10-11 years: http://www.indexmundi.com/iraq/inflation_rate_%28consumer_prices%29.html

and here: http://www.indexmundi.com/g/g.aspx?c=iz&v=71

NOTE: at the bottom of each chart, it states: "This entry furnishes the annual percent change in consumer prices compared with the previous year's consumer prices."

They were already "in the hole", experiencing excessive inflation (Hyperinflation) since the 1990's. It has just recently been brought down, hence the need to change and introduce a new currency. Countries that redenominate, lop, their currency, virtually always do so AFTER they have stabilized or reduce the inflation (from Hyperinflation), because the currency that was needed during the hyperinflation is not as convenient anymore.

This is why a LOP is very possible. No koolaid here

[Doctor Smith]

That article is a precise description of a LOP. If only Shabbibi would have said the same words on U TUBE I might believe it. Fortunately those who wrote that article are no more or less accurate than any other rumor written.

[Ore]

RSS, you are right though. I should have used the term "Inflation", instead of "Hyperinflation" on post #5, however, that does not change the message, reality of it of the situation as to why they may very well replace the current currency like every article has been stating. Believe me, I wish they wouldnt and just introduce lower denominations of the same current currency, that way the one we hold would be honored per unit (25k = 25k), but...

[dinarck]

Iraqs currency is in a hyperiflated state. Im sorry but when you are walking around with stacks of 25,000 notes then your country is in a prime spot for redenomination. Am I the only one who sees this? I think so many people have been made to believe that it is impossible for Iraq to RD that they actually do believe it.

[skepticaldinar]

Must be the paid LOPPER LOL! I have to say I will be the thorn in LOPS side until we see the true RV dont let this sell you. LOP wont happen to much rides on this for it to lop!

If this truly happens which many of us dont believe this will prove how corrupt the govt is since all the things that have been paid for Iraq! As well do they really want to create another war. I will say this happens good bye USA we are screwed which we hope since our govt has a big hand in this dont fool yourself thinking they dont but hopefully they dont allow this word most of us dont believe LOP which how can this guy call hyperinflation when inflation is only 5.7% based on what Shabibi said? Some more lies we gather since it has to be in the 100s if not 1000s of % inorder to LOP! Maybe just another excuse to prove how corrupt this whole thing is! If this happens I feel sorry for the guy who sat here for 6 years or more! What a joke! Dont believe in this article its just like the ministers would be seated over and over and never did so this seems to be more smoke!

In all due respect, hyperinflation has nothing to do with inflation. It is not a result of inflation,it is however caused by deflation. A countries loss of confidence in their government and monetary system is what usually causes hyperinflation.I would say that Iraq qualifies,wouldn't you? As many boots on the ground have said... The people generally use the USD instead of their own currency.They hold USD because they have no faith in their own currency, which is a direct result of having no faith at all in their own government.The Iraqi people have been in a state of depression. for quite some time...a fair statement?Please don't bash the post from this user without understanding what hyperinflation is,and all of it's forms.

[skepticaldinar]

Iraqs currency is in a hyperiflated state. Im sorry but when you are walking around with stacks of 25,000 notes then your country is in a prime spot for redenomination. Am I the only one who sees this? I think so many people have been made to believe that it is impossible for Iraq to RD that they actually do believe it.

You have to understand yourself that people do not believe that an RD is possible simply because they do not understand that an RD is not the same thing as a LOP.Everyone seems to be confusing the terms to mean exactly the same thing.A LOP is pretty much impossible in Iraq's case,but until people understand that an RD is not a LOP,they will not concede the fact.

[skepticaldinar]

In all due respect, hyperinflation has nothing to do with inflation. It is not a result of inflation,it is however caused by deflation. A countries loss of confidence in their government and monetary system is what usually causes hyperinflation.I would say that Iraq qualifies,wouldn't you? As many boots on the ground have said... The people generally use the USD instead of their own currency.They hold USD because they have no faith in their own currency, which is a direct result of having no faith at all in their own government.The Iraqi people have been in a state of depression. for quite some time...a fair statement?Please don't bash the post from this user without understanding what hyperinflation is,and all of it's forms.

What I should have added, is that with inflation the monetary value goes down which may cause a state of depression or recession with the increase in prices.Hyperflation does not have to be caused by inflation to clarify my previous post.

[Doctor Smith]

Inflation isn't the reason they aren't using the Dinar as much. It still buys the same amount of goods for the same amount of Dinars. Other than electricity their isn't much inflation at all.

Two reasons they might not be using the Dinar. (1) They are hoarding it because it could go up in value. (2) The larger bills are hard to come by so it is more convenient to use the US Dollar instead of stacks of Dinar.

[keepmwlknfny]

"Re-denomination can usually only be undertaken once inflation is under control and over the last few years, inflation in Iraq has dropped from over 30 percent to single digits. Nonetheless Iraqi opinions about the planned change remain divided."

All the people that swear up and down they cant RD or LOP the zeros because they dont suffer from hyperinflation need to read this statement here over and over and over and over and over and over and over.....and over and over and over and over and over LOL get my drift?? Matter of fact they need to read the reason why Turkey LOPPED the zeros as well, over and over and over and over and over and over and over and over......... They didnt lop the zeros because of hyperinflation either......

Disclaimer: By no means is this saying Keepmwlknfny determines that it will with out a doubt LOP or that he is for the LOP.........just that its a possibility......

(such a shame i have to add that)

[skepticaldinar]

Inflation isn't the reason they aren't using the Dinar as much. It still buys the same amount of goods for the same amount of Dinars. Other than electricity their isn't much inflation at all.

Two reasons they might not be using the Dinar. (1) They are hoarding it because it could go up in value. (2) The larger bills are hard to come by so it is more convenient to use the US Dollar instead of stacks of Dinar.

Think you skimmed through and missed the point good Doctor. Inflation and hyperinflation do not have to go hand in hand.Generally they do,but not in rare cases such as this.Inflation can be irrelivent here,as symptoms do point to hyperinflation. Or should I retract all and say that hyperinflation can't be the case because the Iraqi people believe fully in their government and monetary system in order to make everyone happy? Protesters holding up a 1k dinar note and screaming this is only worth a dollar may have been a better example?

[Doctor Smith]

Think you skimmed through and missed the point good Doctor. Inflation and hyperinflation do not have to go hand in hand.Generally they do,but not in rare cases such as this.Inflation can be irrelivent here,as symptoms do point to hyperinflation. Or should I retract all and say that hyperinflation can't be the case because the Iraqi people believe fully in their government and monetary system in order to make everyone happy? Protesters holding up a 1k dinar note and screaming this is only worth a dollar may have been a better example?

If the plan was to lop. Why didn't they do it in 2003 when the new currency was put into place after the Hyper inflation occurred? A lop will not reduce the paper and is the equivalent of putting your finger over the zeros. Pointless. That 1K dinar note will never again be worth 1000 dollars with a lop. It would be better for everyone if they did nothing at all. Then it would at least have a chance of slowly revaluing.

[dinarck]

If the plan was to lop. Why didn't they do it in 2003 when the new currency was put into place after the Hyper inflation occurred? A lop will not reduce the paper and is the equivalent of putting your finger over the zeros. Pointless. That 1K dinar note will never again be worth 1000 dollars with a lop. It would be better for everyone if they did nothing at all. Then it would at least have a chance of slowly revaluing.

That 1000 note never was worth a 1000 dollars. It is and has been worth 1 dollar. Who knows they may do nothing at all. Iraq is good at that.

[Sal0525]

And why is anyone happy about this????

I keep hearing, don't worry, your notes will still be worth the same yet what isn't being mentioned and ignored is the fact that this is like losing shares in a company... Your 25,000 shares that could have been RV'd at a good rate is now only going to be RV'd at 25 shares instead!

In other words, if the RV happened today with no dropping of zero's at 1 dollar per IQD, you would have that $25,000 dollars. From what I am hearing with the dropping of zeroes, is that they are taking away the possibility of 25,000 dollars and giving us 25 dollars instead!!!!!

[dinarck]

And why is anyone happy about this????

I keep hearing, don't worry, your notes will still be worth the same yet what isn't being mentioned and ignored is the fact that this is like losing shares in a company... Your 25,000 shares that could have been RV'd at a good rate is now only going to be RV'd at 25 shares instead!

In other words, if the RV happened today with no dropping of zero's at 1 dollar per IQD, you would have that $25,000 dollars. From what I am hearing with the dropping of zeroes, is that they are taking away the possibility of 25,000 dollars and giving us 25 dollars instead!!!!!

I don't see how anyone could be happy about it. You are right. Instead of making millions we would make thousands. Thats just the way it is. If it happens then it happens. There is nothing we can do about it. Hopefully it is misinformation and they will turn around and do the opposite. At this point all we can do is wait and see. I guess that's all we could do from the begining.

[skepticaldinar]

If the plan was to lop. Why didn't they do it in 2003 when the new currency was put into place after the Hyper inflation occurred? A lop will not reduce the paper and is the equivalent of putting your finger over the zeros. Pointless. That 1K dinar note will never again be worth 1000 dollars with a lop. It would be better for everyone if they did nothing at all. Then it would at least have a chance of slowly revaluing.

I don't believe it will lop.I believe it will redenom bringing the rate closer to a 1-1 exchange as all adjustments are made. This will bring confidence,as the rate will no longer be a joke and the cic will be reduced.Transactions will be much easier as they will not require so many notes.Both notes will more than likely co-exist for a predetermined period until the 000's are phased out completely if the rd occurs. The rate would be able to gradually climb from there.

[imgesing]

RSS, you are right though. I should have used the term "Inflation", instead of "Hyperinflation" on post #5, however, that does not change the message, reality of it of the situation as to why they may very well replace the current currency like every article has been stating. Believe me, I wish they wouldnt and just introduce lower denominations of the same current currency, that way the one we hold would be honored per unit (25k = 25k), but...

I believe your 25 K note will be worth 1000 25 notes. Hence losing the ZERO's.

We shall see.... Be well.

[The Eagle]

STOP WORRYING ABOUT A LOP. If you and I were the only holders of Dinars Iraq would screw us in a New York second. But if Uncle Sam is the major player, we're just along for the ride. It's been stated in print and prophesy that Iraq would soon become the worlds strongest nation (once again). What makes a nation powerful? Its MONEY, not arms. Without money you quickly run out of ammunition but with money you can buy all the weapons you need to protect your nation. For America to remain as strong as the "strongest nation in the world" America must capitalize big on this event. LOP's would only multiple the Dinars value by 4-5 times at best. America is greedy and so is Maliki. You can sleep confident tonight with the knowledge that we are dealing with major power brokers who play for high stakes - not peanuts. We're just small fry floating upstream with the big fish. Count on at least a par valuation ($1/Dinar) and more likely something in the stratosphere - maybe $3.75 TO $4.75 depending on how confident the GOI is about their near future. Don't forget, Iraq has Oil, Gas and Water. And it's sweet crude oil too - close to the surface and easy to refine. Talk about a literal goldmine. I started out as a cautions skeptic but after a year of research I'l feeling very confident in an unimaginable value - and on Monday no less. Plan on $3.00 and you'll be right in the ballpark.

Go RV on the 1st

Edited May 1, 2011 by The Eagle