Iraqi Officials Divided

Iraqi Officials Divided Over Dinar ‘Reset’

7.24.13

Two Iraqi parliamentary committees monitoring fiscal policy in Iraq have held  two contradictory positions on the Iraqi currency “reset” project, which would  delete three zeros from the currency. There has been much debate about the  project’s feasibility and the date of its implementation.

While the parliamentary Economic Committee believes that the deletion of three  zeros from the Iraqi currency would strengthen it, the parliamentary Finance  Committee fears  that this project would open the door to counterfeit operations.

In a statement to Al-Monitor, Mudher Mohammad Saleh, former deputy  governor of the Central Bank of Iraq, warned against the consequences of such a  step if it is not implemented at the appropriate time.

Abdul Abbas Shayya, a member of the Economic Committee in the Iraqi  parliament, told Al-Monitor, “Reforming the management of  the Iraqi currency now requires the deletion of three zeros. This has been  endorsed by the parliamentary Economy and Investment Committee.”

Shayya, an MP for the State of Law Coalition led by Prime Minister Nouri al-Maliki, added that the Economic Committee “asked  the government and the Central Bank to quickly replace the current Iraqi  currency with another that is less [in value] by three zeros.”

“The Iraqi currency is weak, and the money supply has amounted to  multi-trillions because of the existence of these useless zeros,” he said. “The  country will witness a significant increase in oil revenues, financial earnings  and high budgets. Thus, we need to print new banknotes, as estimated by the  Central Bank.”

“Iraq would need about 9 billion banknotes in the event of applying the  deletion of zeros. Iraq today is dealing with 4 billion banknotes,” he said.

MP Nahida Daini of Ayad Allawi’s Iraqiya List agrees with Shayya, her colleague  in the Economic Committee. In an interview with Al-Monitor, she  stressed the need to implement the Iraqi currency “reset” project. However, she  said that the government fears money laundering operations in the event of the  project’s implementation.

She said, “The Economic Committee last week requested to implement the  deletion of zeros from the currency, but the Council of Ministers asked to delay the process for  fear of money laundering operations.”

Daini believes that the government’s fears “are mere concerns.” She said,  “There are regulators in Iraq who can follow up and ensure the integrity of the  project.”

Meanwhile, the parliamentary Finance Committee believes that channelling  resources toward ensuring the stability of the local currency exchange rate is  better than the deletion of zeros.

Magda al-Tamimi, member of the parliamentary Finance Committee, told  Al-Monitor, “The delay in deleting zeros from the currency was due  to fears of possible fraud operations. The Finance Committee is currently  focused on controlling the currency auction,” which is carried out by the  Central Bank to ​​provide merchants with hard currency necessary for import.

Iraq’s fiscal policy has come under criticism due to the fluctuation of local currency  exchange rates against global currencies.

According to Tamimi, “Iraq is not ready to control the possible currency  fraud that may result from the deletion of zeros.” The Finance Committee, Tamimi  added, “is now working toward controlling the Iraqi currency auction, which is  witnessing a significant fluctuation in the exchange rate of the Iraqi  dinar against the dollar.”

“Development is the gateway to strengthening the currency. Thus, raising the  value of the dinar is more important than the deletion of zeros,” she  said.

Saleh told Al-Monitor, “The deletion of three zeros from the  currency means deleting three grades from the calculation records of the  Republic of Iraq. The decision to implement the deletion of zeros next year is  very dangerous and risky. This issue must be done at the appropriate time.”

Saleh added, “We need to reform the currency management and accounting  systems in the country in general. This can only be initiated in a new fiscal  year.”

“There are many encouraging positive factors to reform the currency  management system,” he said, also noting that the deletion of zeros “does not  only involve changing the design of the currency. It implies changing the  economic system in the country in general.”

al-monitor.com