Dinar Peg

Iraqi Dinar in climates

The Iraqi dinar has been subject to many controversies following the recent war in Iraq. The picture of Saddam Hussein on the banknote is illegal in the country and yet there was still printing of the note after the end of the war to supplement the economy in Iraq. Therefore, even after the war, every banknote aside from the reprinted "Horse herd" 25 Dinar note contained the picture of Saddam Hussein.

Following the 1991 war, Iraq's currency was printed both locally and in China using poor grade wood pulp paper (rather than cotton or linen) and inferior quality lithography. Ironically, fake and counterfeit banknotes often appeared to be of better quality than the real thing. Despite the collapse in the value of the Iraqi Dinar, the highest denomination printed until 2002 was 250 Dinars. There was the creation of a 10,000 Dinar banknote to be used in transactions between companies but in reality due to inflation and the economical climate of the period, the banknote had an exchange value of less than 5.00 USD.

Iraq Dinar

In October 2003 the United States occupation administration authorized a new banknote issue comprising of denominations of 50, 250, 1000, 5000, 10000, and 25000 Dinars. The notes were extremely similar in design and print quality to notes issued by the Iraqi Central Bank in the mid 1980s. A 500 Dinar note was issued in October 2004, and notes of 25 and 100 Dinars are anticipated in the future for the Iraqi economy. In December of 2004, the Central Bank of Iraq announced that it would issue coins of 25, 50 and 100 Iraqi dinars.

Before the 1991 gulf war, the Iraqi dinar could roughly be converted to $3 USD. However, the black market rate was closer to 0.30 USD per Dinar. The currency slid during the post 1991 war United Nations embargo. The value of the Iraqi Dinar has appreciated from lows of approximately 3,000 Dinars per US Dollar to 1,460 Dinar per USD as of January 2005.

Peg the Dinar

Although the Iraqi economy can only improve from its present dire state, especially given the massive debt forgiveness agreed to in principle by the Paris Club group of Iraqi creditors and other Iraqi creditors, this is unlikely to cause a dramatic short-term appreciation in the currency back to levels seen prior to the 1991 war; Chances are, the Dinar will never Peg at that rate again!

The value of the dinar is set to increase as the economic climate of Iraq increases due to a more stable governing body. What will the Dinar peg at? Only time will tell.