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Iraq Said To Be Planning Currency Overhaul, Redenomination


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June 24, 2011

BAGHDAD -- A senior Iraqi Central Bank adviser says the government has adopted a two-pronged plan to restructure the national currency in order to facilitate large transactions and make government accounts more efficient, RFE/RL's Radio Free Iraq (RFI) reports.

Mudhhir Muhammad Salih, a member of the bank's advisory panel, told RFI on June 23 that in the short term, larger banknote denominations of the dinar will be issued to simplify major transactions.

He said that because so many Iraqis still deal mainly in cash, it is cumbersome to carry bags full of money to pay for expensive items like cars. The inconvenience leads people making such purchases -- as well as many entrepreneurs -- to use dollars for those kinds of transactions instead of dinars, something the government wants to end.

He added that large denominations equivalent to around $100 will be issued to simplify major purchases, and new coins and lower denominations will be introduced for smaller transactions.

In the longer term, Saleh said a redenomination is needed wherein three zeros will be dropped so that the 25,000 Iraqi-dinar banknote -- currently the largest denomination -- becomes a 25-dinar note.

He said the change is inevitable, considering the economy is expecting high growth in the coming years with a planned increase in oil production to finance reconstruction projects.

Saleh said there are currently some 29 trillion dinars in circulation in Iraq, represented by some 6 trillion banknotes of various denominations, most of them quite small. He said this also causes complications for the central bank and government, as well as commercial accounting departments.

Saleh said the monetary-restructuring plan was drawn up with the help of foreign experts and financial institutions, including the International Monetary Fund (IMF), of which Iraq has been a member since 1945.

The plan will soon be presented to the cabinet, which is expected to subsequently send a bill to parliament.

Saleh noted that until 1980 the Iraqi dinar exchange rate was 1 dinar/$3.3 compared to $1/1,168 dinars now due to hyperinflation that occurred during the latter part of the late ousted leader Saddam Hussein's reign.

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im not an economist....lol....but I think we are receiving info from the CBI that contradict itself..I have no links just MY opinion....they say the will restructure the money by having the 25000 and 25 dinar notes running at the same time.....does this mean they have equal value???? they are confusinf me ...maybe im an idiot....I just think they are preventing a run on the dinar as we speak without saying they are going to raise the value...otherwise YOU WOULD NOT NEED THE SMALL NOTES

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im not an economist....lol....but I think we are receiving info from the CBI that contradict itself..I have no links just MY opinion....they say the will restructure the money by having the 25000 and 25 dinar notes running at the same time.....does this mean they have equal value???? they are confusinf me ...maybe im an idiot....I just think they are preventing a run on the dinar as we speak without saying they are going to raise the value...otherwise YOU WOULD NOT NEED THE SMALL NOTES

Thats a good point....mmmmmmmm if they intended on dropping the 3 zero's why would you need 25 notes GOOD POINT!! I have started to breath again lol

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Thats a good point....mmmmmmmm if they intended on dropping the 3 zero's why would you need 25 notes GOOD POINT!! I have started to breath again lol

Because eventually thats how they will get the larger bills back and destroyed....thats how they will be taken out of circulation and the new lower denoms will take over....it can be a slow process or a quick one depending on how they want to handle it.....but naturally the bigger bills will be taken out and not used anymore because the smaller notes will have the same purchasing power the big ones once had......

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Because eventually thats how they will get the larger bills back and destroyed....thats how they will be taken out of circulation and the new lower denoms will take over....it can be a slow process or a quick one depending on how they want to handle it.....but naturally the bigger bills will be taken out and not used anymore because the smaller notes will have the same purchasing power the big ones once had......

So help me understand keep, wouldn't that be more of an "exchange" than a LOP? Or do you still consider that a LOP if the smaller notes have the same purchasing power?

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Because eventually thats how they will get the larger bills back and destroyed....thats how they will be taken out of circulation and the new lower denoms will take over....it can be a slow process or a quick one depending on how they want to handle it.....but naturally the bigger bills will be taken out and not used anymore because the smaller notes will have the same purchasing power the big ones once had......

The only thing is that if you are trully going to remove the 000's then you are going to issue a $100,000 to facilitate transactions right now. This will increase the money supply immensely. Are you going to go to 50T+++ IQD? That's about what we are talking about to facilitate transactions unless you remove the 1000, 5000, 10,0000 and 25,000 in the process. Or do they remove the other 000's while issuing 100,000? If they do not it would be a long trip back. Even so it maybe 1-5 years. Is this what they want? The best way back to draw in liquidity? Seems interesting and exactly the opposite of what I might do. Very interesting. Speculation running rampant. Will enjoy the ride....at least I hope.

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Because eventually thats how they will get the larger bills back and destroyed....thats how they will be taken out of circulation and the new lower denoms will take over....it can be a slow process or a quick one depending on how they want to handle it.....but naturally the bigger bills will be taken out and not used anymore because the smaller notes will have the same purchasing power the big ones once had......

So Keep do you think we will have a cash in window to get rid of the larger denoms?? Or do you think straight up LOP?

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From what I understand, a redinomination would be to control money supply and more importantly inflation. Since Iraq's inflation rate is currently low, a RV is more likely. I could be wrong but that is how I understand it after talking with a contact that is in the know when it comes to this stuff.

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Hope im wrong, but it sounds like a 25k will be worth $100. So a possible RD to 25 from 25k with the new value at $4 per IQD. 4x investment...not good...hoping smoke and mirrors. I can't retire or stimulate the economy off of this crappy roi :( really hope im wrong.

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