History of the Dinar

Signs of Growth

In the wake of Saddam Hussein’s deposition in 2003, Iraq has undergone political and economic changes. Many believe that the rebuilding of Iraq’s infrastructure will stabilize Iraq socially, politically, and economically. The monetary system established by the new government encourages foreign investment, a key to develop a strong economy.

With the new government establishing a new monetary system that encourages foreign investment, and the Central Bank of Iraq awarding foreign licenses, many also believe that the value of the new Iraqi Dinar currency is poised to escalate.

Presidential Order 13303

This Presidential Order allows U.S. citizens to invest in the new Iraqi economy. Under this order and Coalition Provisional Government Order 39, a U.S. citizen has the same rights to investments as an Iraqi citizen. Investment in the new Iraq is guaranteed under the Presidential Order 13303 removing sanctions on investment in Iraq. The new order allows for a restructuring of the banking system in Iraq. Currently, U.S. citizens are allowed to invest in Currency, Stocks, Bonds, Real Estate and Business in Iraq.

Increase in Treasury Bills

The government of Iraq will issue more Treasury bills to the secondary market. For the first time in years, the central bank auctioned Treasury bills in July. Thus far, local banks have bought 900 billion Iraqi dinars ($628 million) worth of three-month bills with coupons ranging between 2.5 percent and 6.8 percent. To improve Iraq’s local currency, the dinar against the dollar, Iraq’s central bank also plans to build up its foreign-currency reserves.

Creating viable domestic capital markets will start the process of trimming the massive pre-war debt. Iraq’s path to debt reduction along with the generosity of the Paris Club by forgiving 80% of Iraq’s debt is good news for the Iraqi economy. Iraq’s growth-oriented policy, along with Iraq’s prospects of economic stability makes investing in the dinar potentially lucrative.

The Central Bank of Iraq (CBI)

For the first time in decades, the central bank of Iraq awarded foreign bank licenses to the following banks: HSBC, Standard Chartered, National Bank of Kuwait, Iranian National Bank, Commercial Housing bank, and Bahraini Arab Banking Institute. The Bahraini Arab Banking Institute is listed on the Bahrain, Kuwait, and Paris stock exchanges, and its major shareholders include the Kuwait Investment Authority, the central bank of Libya, and the Abu Dhabi Investment Authority.

Granting foreign licenses and liberalizing interest rates will create a vibrant free-market economy. Iraq’s re-invigorated banking policies will positively effect the value of the dinar in the near future. Furthermore, The Central Bank of Iraq is an independent agency, not affected by the political parties of the many factions in Iraq.

Iraqi Dinar Potential

Prior to United Nations sanctions, the Iraqi dinar traded at 3.35 per U.S. dollar, and prior to the war in Iraq, the Iraqi dinar traded at .33 U.S. Dollars. During major combat operations, the Iraqi dinar declined to an all time low. However, after major combat operations, the value of the dinar increased 25%. Countries such as Germany (post WWII) and Kuwait (post Iraqi invasion) experienced a similar devaluation of their currency, but both countries recovered.

Today, the dinar has increased from 3,500 against the dollar during the U.S. led invasion last year to 1,400 against the U.S. dollar. Imagine the growth potential of the Iraqi dinar once Iraq recovers and begins to enjoy the potential revenue of a country rich in oil and other natural resources.

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