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Iraq Said To Be Planning Currency Overhaul, Redenomination
A senior Iraqi Central Bank official says the government has adopted a two-pronged plan to restructure the national currency in order to facilitate large transactions and make government accounts more efficient.
Saturday, June 25, 2011 By RFE/RL
BAGHDAD -- A senior Iraqi Central Bank adviser says the government has adopted a two-pronged plan to restructure the national currency in order to facilitate large transactions and make government accounts more efficient, RFE/RL's Radio Free Iraq (RFI) reports.
Mudhhir Muhammad Salih, a member of the bank's advisory panel, told RFI on June 23 that in the short term, larger banknote denominations of the dinar will be issued to simplify major transactions.
He said that because so many Iraqis still deal mainly in cash, it is cumbersome to carry bags full of money to pay for expensive items like cars. The inconvenience leads people making such purchases -- as well as many entrepreneurs -- to use dollars for those kinds of transactions instead of dinars, something the government wants to end.
He added that large denominations equivalent to around $100 will be issued to simplify major purchases, and new coins and lower denominations will be introduced for smaller transactions.
In the longer term, Saleh said a redenomination is needed wherein three zeros will be dropped so that the 25,000 Iraqi-dinar banknote -- currently the largest denomination -- becomes a 25-dinar note.
He said the change is inevitable, considering the economy is expecting high growth in the coming years with a planned increase in oil production to finance reconstruction projects.
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Saleh said there are currently some 29 trillion dinars in circulation in Iraq, represented by some 6 trillion banknotes of various denominations, most of them quite small. He said this also causes complications for the central bank and government, as well as commercial accounting departments.
Saleh said the monetary-restructuring plan was drawn up with the help of foreign experts and financial institutions, including the International Monetary Fund (IMF), of which Iraq has been a member since 1945.
The plan will soon be presented to the cabinet, which is expected to subsequently send a bill to parliament.
Saleh noted that until 1980 the Iraqi dinar exchange rate was 1 dinar/$3.3 compared to $1/1,168 dinars now due to hyperinflation that occurred during the latter part of the late ousted leader Saddam Hussein's reign.
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