DrDinar Blog

Iraq To Circulate 2 Currencies At The Same Time

Never has anything like this that speculators and Iraqi traders have thought of. For years, no one was not even totally reluctant to the possibilities that Iraq would actually do something unexpected as letting two currencies circulate all at the same time, was it? What dinar news we have right now!

On May 20, 2012, the Center Brief for the Iraqi Media Network in Baghdad revealed something that might halt RV debates. The said media network revealed that the Parliamentary Finance Committee affirmed that Iraq and the rest of the IQD traders will see two currencies running at the same time by the year 2013. The Finance Committee said that this phenomenon will actually happen right after the deletion of zeros with the survival of the remaining current currency throughout the succeeding year. So, what will happen to our banknotes? Is this a threat or another opportunity to anticipate?

A lot of people know that the lopping of zeros will be a significant change because it will help local and foreign investors to trade on lesser cash but, two currencies running along the premises of the country seems to be another story.

To understand better, we can actually check on the released statement from one of the members of Finance Committee, Hassan Salman, “The central bank operates in more than six months from now on the position of the deletion of zeros from the Iraqi currency and the current that will be applied starting from next year.” Salman pointed out that the Finance Committee is constantly in contact with Sinan Al Shabibi, the Governor of Central Bank of Iraq.

He added that the Governor of CBI is, “constantly learning about the Finance Committee on the details of this issue and the process of replacing the current currency the new currency will continue over the next year and that the currency adjustment will benefit the Iraqi economy and will facilitate the handling of cash in the country by reducing the money supply in circulation now, which Tkdrbhawwala 30 trillion dinars.”

If this is the case then it would mean that IQD traders might actually see an increase by three zeros on the Iraq money. Well, we could actually say that this might really happen as Salman admitted that he did an extensive study and formulated a conclusion that lifting of the zeroes will strengthen the value of the dinar.

Will the Central Bank of Iraq still have time to analyze what the Finance Committee is trying to say? Iraq is becoming logical, isn’t it? Well, given the fact that the Central Bank of Iraq has four branches in Basra Sulaymaniyah, Erbil and Mosul, it is legible enough to mandate necessary monetary policy to maintain price stability on the currency’s exchange rate and to grant the vital role in letting two currencies to circulate right at the same time.

This is like Iraq taking a higher leap just to keep up with the rest of the Arab world. Recently, there have been lots of significant events happening in the country. Some of them were about the implemented policies to protect the country’s US dollar reserve and the financial institutions getting a big shot from International sectors.

It seems that year 2012 is becoming the year for strengthening the value of the currency and implementing necessary policies to keep it from fraud and laundering. Will this new move of the country actually help stabilize its currency? Will this bring good news to people who have been waiting real good news from IQD? What we can certainly say right now is that this is unexpected dinar news that Iraq has brought to the world.

The law of averages dictates that many investors will not exchange their dinars when the currencies change and thereby risk loosing on future exchange policies with Central Bank of Iraq. Those that can tolerate the risk and hold on till the time comes to exchange for the new style notes, may have little or no loss in the whole process of exchanging. Keep your eyes on the prize and only invest what you can afford to do without.

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Iraq to Protect Its US Dollar Reserves From Iran and Syria

Just last June 6, 2012, Baghdad (News) released a report telling that some Iraqi dinar traders and Iraqi officials affirmed that (for the very least) the Central Bank of Iraq has achieved success in maintaining stability on its Dinar currency with the help of state-run banks in the country.

So, why do these traders and officials have to tell us this? Well, one could understand the reason behind the affirmation if we check the situation of Iraqi Dinar last March and April of 2012.

March and April of 2012 were struggle months for CBI because they needed to protect their US dollar reserves from the illicit flow of the US dollar to Syria and Iran. There even came to a point where in the demand for US dollar from traders, who wanted to sell US dollar to Syria and Iran by trading in their Iraqi Dinar notes, reached a worth of almost 400 million US dollars.

Why is this hard to cope for the Iraqi Central Bank? It is simple. If the reserves of their US dollars would run out, chances are potential foreign investors (that would most likely include international speculators who are legitimate to participate on the banks daily auction) might not be able to trade on the succeeding dinar to dollar auctions. It would cause imbalance on their part and might sacrifice some of legitimate foreign investments.

To attend to this issue, CBI decided to sell their US dollar reserves only at a fixed price to legible Iraqi dinar traders. The Central Bank lowered the exchange rate from 1280 IQD to 1210 IQD for 1 USD. This gave ground to fill in the gap between the market price and the official selling exchange rate.

Deputy Governor of CBI, Dr. Sinan Al-Shabibi, even noted that the difference in the dinar value of the CBI and that of the market was 7%. However, when CBI managed to control the stem the illicit flow of its hard currency to Iran and Syria, he was confident and, expected that the gap would fall to 4% in the weeks to come.

With the current daily auction, the selling price of US dollar to IQD in Rasheed and Rafidain has reached 1189 IQD to 1 USD while that of the market price is only 1210 IQD to 1 USD. Is this good news or another threat to the Dinar play? Usually, CBI sells 250,000 USD to private banks every week and another 75,000 USD in exchange for Iraqi Dinar, to exchange companies and money transfer transactions. So, who can participate to the daily auction? How would CBI differentiate from an illegitimate trader to reputable IQD dealers?

Iraq strictly practiced the rules on who can participate in the daily auction. Started on April 1 2012, traders are bound on the members of the Iraqi Chamber of Commerce to obtain the proper licenses to freely participate in the auction, similar to the licensing required to import and export Dinar to and from Iraq. This simply means that they have to formally register their businesses from the Iraq Trade Ministry.

Unfortunately, not all traders are happy about the imposed requirements of the Iraqi Chamber of Commerce. They said that the permit will make them wait for 30 days to let them send money to foreign countries. In short, it consumes time and will force them to rise at a higher price in the local market than that of CBI’s. However, will this effectively crack down the illicit movements of the USD reserves of Iraq to Iran and Syria? Will any of the members of the Iraqi Chamber of Commerce dare to tolerate the illegal outflow of Iraq’s property to these countries?

Since Syria and Iran are still under Western sanctions, Iraq is becoming a great source of US dollars for some of its neighboring countries and to businesses who seek hard (stable) currency to support their weakening local banknotes. How Iraq officials respond to this will play out into the value of the Iraqi Dinar, so far, it looks like Iraq has a big dog in the fight.

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Written by DrDinar. This article can be reprinted
online or offline as long as this box remains and is
hyperlinked online.
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