After much deliberation, the Iraqi government announced that, beginning in 2013, they will begin removing three zeros from Iraqi banknotes. The change will take three years to complete. Despite economic experts staying Iraq is not ready to change its banknotes, the Iraqi Parliament and the Finance Committee both support the decision to redenominate the currency.
Iraq’s currency, the Iraqi dinar, currently has its smallest unit set at 250 dinars, the equivalent of only $0.20. The Central Bank of Iraq is going through the efforts to remove the zeros in order to redenominate the Iraqi dinar. MP Hassan Ozman of the Iraqiya List believes that this will work for Iraq and benefit the economy due to the measures’ success in other countries. Ozman also said that security measures would be taken to distinguish genuine notes from fake ones.
Despite broad support for the decision to change the banknotes, there are some opponents to the move. Ahrar bloc MP Abdul Hussein believes that current economic conditions, including the lack of reforms in the banking sector, make it premature to change the banknotes.
Despite the predicted salutary effects on the Iraqi economy, the experiences of other countries indicate that issuing the new currency may in fact be unwise. For example, Brazil reissued currency numerous times throughout the last decades of the 20th centuries. The constantly changing value of the currency caused families a great deal of suffering as they saw the value of their savings constantly being depleted.
The Iraqi dinar is a controlled exchange-rate currency. The IMF permits countries with “transitional” economies to control their exchange rates. However, the dinar is not traded on any foreign exchange markets. Instead, it is bought and sold by licensed currency dealers handling existing banknotes.