Dinar G : The Iraqi Dinar (IQD) is a currency used in Iraq. The Iraqi dinar is the country’s currency, and its currency code is IQD.
The Iraqi dinar, which is made up of 1,000 fils, is circulated by the Central Bank of Iraq.
Fils are no longer in use due to inflation, and dinars are now the lowest unit of currency in circulation. 1
Iraqi Dinar (IQD) is a currency used in Iraq
The IQD is fixed at US $1 = 1,450 IQD as of Q2 2021, while the actual exchange rate may vary slightly around that peg.
Important takeaways:
The Iraqi dinar is the country’s currency, and its currency code is IQD.
The money has been utilised in a variety of frauds, and investors are sometimes lured to pay big premiums for it in the hopes that it would be revalued higher in the future.
Because Iraq’s principal export, oil, is priced in US dollars, the dinar has minimal global demand.
The Iraqi Dinar: An Overview (IQD)
When the dinar was first adopted in 1932 to replace the Indian rupee, one dinar was worth 11 rupees.
Until 1959, the dinar was linked to the British pound (GBP), after which it was linked to the US dollar (USD).
Until the Gulf War in the early 1990s, the exchange rate remained largely constant. 1
Prior to the Gulf War in 1990-1991, the dinar was worth more than $3 in US money.
3 The Swiss dinar was a currency that was printed prior to the Gulf War.
1 Due to a lack of printing equipment as a result of war-related sanctions, the government issued new currency that was of lower quality after the conflict.
By 2003, the currency had fallen to an average of 1,950 dinar per USD. The old Swiss banknotes were still in use in some parts of the country. 4
Beginning in 2003, fresh notes were printed, this time of higher quality, to allow the entire country to utilise a single currency.
Old notes were exchanged one for one for new ones, whereas Swiss notes were traded one for 150 new notes.
1 The USD/IQD exchange rate was set at 1,190 until December 2020, when Iraq’s Central Bank announced that the country’s currency would be devalued by more than 20% in response to a severe liquidity crisis brought on by low oil prices, a move that has sparked public outrage as the government struggles to cover its costs. The peg is fixed at 1:1,450 as of December 2020.
Because Iraq’s principal export, oil, is valued in US dollars, the dinar has minimal value outside of Iraq.
Despite this, there are a slew of schemes attempting to persuade individuals to acquire dinars in the hopes of a future price increase.
Many organisations and publications advise investors to avoid IQD scams.
Brokers selling IQD cash will often charge a premium of 25% to 30% over the official exchange rate.
Those who purchase it will suffer significant losses right away. It’s also tough to sell because there isn’t much of a demand for it outside of Iraq.
If someone wants to sell dinars, brokers usually offer 30% less than the official exchange rate.
If the official exchange rate does not change, these transaction expenses might erode 40 percent to 60 percent of the capital invested.
Iraq has annual inflation of 0.4 percent in 2018 and -0.2 percent in 2019, according to World Bank figures.
7 GDP fell to -1.2 percent in 2018, then increased to 4.
4 percent in 2019 before falling to -10.4 percent in 2020. 8
Investing in the Iraqi Dinar: Scams
In the USD/IQD currency pair, legitimate forex trading is practically non-existent.
Iraqi dinars are not traded by major banks. Iraqi dinars can only be purchased or sold through a limited number of money exchangers, some of whom may or may not be legally registered.
As previously stated, these exchangers or brokers often charge 30% or more in fees, which are reflected into the exchange rate quoted.
6 Thus, without the currency rate moving, buying and selling IQD could result in losses of 50%.
In times of excessive inflation, existing high-value notes are redenominated into new lower-value notes by eliminating zeros to increase the currency’s purchasing power.
There have been reports that the dinar will be redenominated, but nothing has come of these rumours.
The IQD’s value would not be increased by redenomination without revaluation.
Those who have old notes will most likely have to exchange them for new ones, which will very certainly result in additional fees if they are outside of Iraq.
A revaluation is a calculated modification of a country’s official currency rate relative to a set baseline, such as gold or the US dollar.
Buying and Selling Iraqi Dinar Outside of Iraq as an Example
Dinar has little value outside of Iraq, therefore purchasing it usually either purchasing currency from a broker and storing it with them, or obtaining physical delivery.
As of August 2021, the official exchange rate is 1,459 dinars per dollar.
9 At this rate (1 million/1,459), one million dinars would cost roughly $685.51. If you buy one million dinars through an online broker, they may give you $857.
This is a 25% premium over the official rate. When you include in delivery costs, the premium might be substantially higher.
Assume that the USD/IQD exchange rate remains unchanged. Because there is little demand for the currency outside of Iraq, if our investor wishes to sell their one million dinars, there is likely nowhere to sell them except back to a broker.
To buy back the dinars, a broker might make an offer of $568.97. This is 33.5 percent less than the $685 paid for the dinars, and 17 percent less than the official exchange rate value.
All of this occurs without a change in the real exchange rate.
Buying and selling currencies through brokers that charge a premium on every transaction could result in a loss of more than 30% for an investor.
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