New Banknotes Expected Next Year Despite Warnings from Economists
ERBIL, Kurdistan Region — New Iraqi banknotes are expected to hit the market next year, but economists are warning that now is not the time to change currency due to the weakness of local production and the country’s political situation.
Najiba Najib, a member of the financial committee in Iraqi Parliament, said the new currency would be in circulation next year, with three zeros omitted from the denominations. The new currency will be used alongside older banknotes for three years before the older notes are completely withdrawn.
Mazhar Salih, deputy governor of the Iraqi central bank, said, “We are determined to change the Iraqi currency because the biggest banknote in Iraq is 25,000 dinars which is the equivalent of $21. This has forced Iraqi merchants to resort to U.S. dollars. Besides omitting the zeros from the currency, we will redefine the Iraqi currency and have banknotes larger than 25,000.”
Faysal Ali, vice president of the Kurdistan Economic Forum, does not believe the situation in Iraq is healthy enough for a change of currency. “The political situation in Iraq is very unstable and it is economically weak.”
“Therefore, it is not possible to change the currency now because in order to do so we would need more than a trillion banknotes and coins. Exchanging new banknotes with older ones being used by citizens will greatly harm the economy,” added Ali.
Generally, people need time to adapt to a new currency. Some people in Iraq are still counting money in terms of the older currency — Swiss dinars – that was changed a few years ago.
Ali described in more detail some of the problems that could occur while people adjust to new banknotes. “It is a perfect time for merchants to play with the prices of goods as they wish and make unlawful gains,” he said.
The value and strength of any currency depends on the power of domestic productivity. According to Ayub Anwar Simaqayi, an economics lecturer at Salahaddin University in Erbil,
Iraq is not a productive country.
“It depends entirely on oil which it exports for U.S. dollars. So, if they change the currency of Iraq and the price of oil goes up, it will have no impact on the value of Iraqi currency. But, if the oil prices go down, the currency of Iraq will lose value as well,” Simaqayi said.
During the British mandate of Iraq after the First World War, the official currency of Iraq was the Indian rupee. When the country became independent in 1932, it made its own currency, called dinars [locally known as Swiss dinars for their print in Switzerland]. After the invasion of Kuwait by Saddam in 1991 and the subsequent economic sanction by the United Nations Security Council the Iraqi government started printing its own money known in Kurdistan as “fake” or “prints” in the Kurdistan Region.
As the Baath regime collapsed and coalition forces occupied Iraq in 2003, Iraq modified the dinar—by removing Saddam Hussein’s pictures—and printed new banknotes known as the “Bremer” by locals, named after coalition governor of Iraq Paul Bremer. This is the currency is still in circulation in Iraq.
The financial committee has presented seven different banknotes to the Iraqi central bank which range from 5 dinars to 200 dinars and include coins from 50 fils to 2 dinars coins.
Najeeb said that three Kurdish icons are featured on the new currency: the waterfall of Geli Eli Beg, displaced Fayli Kurds and a woman farmer. The notes will contain Kurdish, Arabic and English script.