Iraqi Dinar


For the past few years I have seen a number of references to the
“investment oportunity” of the Iraqi Dinar (IQD), and a lot of
questions asking when will the RV take place which will suddendly (and
miraculously) change the current Dollar exchange rate from the present
position ( 1200 Dinars = 1 Dollar) to 1:1 ratio or thereabouts. I
thought I would have a look into this to see what it is all about.

Good Investment or Scam?

There were a lot of results from the initial search – some suggesting
this was a good investment and others pointing out that this is just a
scam! On further examination most (if not all) of the “good
investment” recommendations came into one of two categories:

1. People or companies who were prepared to sell you some Dinars ( and
get some commisssion)
2. People who had little or no experience of the currency market who
were prepared to tell others who had even less knowledge what they
should do with their money.

Those advocating that this whole issue was a scam came mainly from the
established mainstream financial press. I do not necessarily accept
that the mainstream press is always to be trusted but am merely stating
what you will find out for youself if you do a similar search.

So what is this all about and why has this been going on for so long?

Lets look at some history which all groups agree on:

1. The original Iraqi Dinar was set up in 1932 and its value was linked
to the British pound.

2. In 1959 (without changing its value) the Dinar link was changed to
the Dollar at a rate of 1 Dinar = 2.8 dollars.

3. Throughout the the 1960s and 1970s the rate changed marginally from
time to time due to devaluations in both the Dollar and the Dinar.

4 The Iran-Iraq war took place between 1980 – 1988 (if you remember
Saddam was regarded as the good guy by the West at the time).

5. As a consequence of this, in the late 1980s although the official
value was 1 dinar = 3.2169 dollars in reality it was difficult to
actually get this rate and a more realistic rate was that 3 dinars bought 1 dollar.

6. The first Gulf war took place between 1990 and Feb 1991.

7. The impact of this war and of the sanctions against Iraq resulted in
an almost total colapse of the Dinar with the value plummetting to
3000 Dinars =1 Dollar.

8. Following the second Gulf war in May 2003 and the deposing of Saddam
Hussein, the US-supported new Iraqi government decided to issue a
completely new Dinar (the notes were printed in the US) and the value was set at 1200 Dinars = 1 Dollar.

9. Since that time the value has changed little other than the normal
fluctuations you get between any world currencies.

Persistent Rumours of Huge Changes in Value

So why should there be persistent rumours about some huge change in the
value of the Dinar and how could this come about?

The arguments for an investment go as follows:
a) The value of the Dinar was once at a much higher level – why can’t
it go up to that level again?
b) The Value of Kuwait’s currency has gone up following the war.
c) There are vast oil reserves in Iraq, therefore the economy (and
value of the currency) must surely increase.

Lets have a look at each of these:

The Value of the Dinar was at a much higher level – Why can’t it get
back to that?

The historical value of the Dinar has no relevance whatsoever to the
position today. We are not even talking about the same currency as the
current Dinar was newly created in 2003/4 as set out above. So lets
ignore history and look at what is going on now.

What about Kuwaits example?

Promoters of the IQD like to compare Iraq now to post-Gulf War Kuwait
— but the situations are completely different.

Before the Gulf War, Kuwait had a stable government and its foreign
investments generated more income for its economy than its oil did.
After the war, despite losing a third of its pre-war investment
portfolio (over $100 billion), Kuwait still had a solvent economy,
a stable government, and an intact infrastructure.  Of course its
currency increased.

In comparison, Iraq entered the war with a $125 billion USD debt, has
almost no infrastructure, no stable government, and no other foreign
income except its oil.

So what about the oil?

A lot of the hype over the IQD centers around Iraq’s vast oil reserves
and their supposed economic value. However, the oil market is at best
unpredictable.  An economy based on oil alone (oil makes up 95% of
Iraq’s foreign exchange earnings) will mirror that unpredictability.
Let’s look at a realistic example: Venezuela.

Oil accounts for 80% of Venezuela’s national exports and 50% of its

government revenues. The country is one of the world’s top five oil
producers.  In the last few years, Venezuela has experienced intense
political instability, including an oil strike and an attempted coup
d’état. The resulting economic chaos has led to the extreme devaluation
of the Venezuelan Bolivar  — today, it is worth only about a third of
its US Dollar value from January 2000, and only about a quarter of its
Euro value from January 2000.

Investing in a country’s currency is tantamount to investing in that
country’s economy as a whole, not in any single commodity.  Investing in
the Iraq Dinar is not the same as investing in Iraq’s oil.

Iraq’s economy is still in dire states:

– Over a decade of international economic sanctions and a devastating
war has left the infrastructure in tatters
– $125 billion of external debt
– Millions of dollars in post-war debt
– No stable government
– Insurgency steadily on the rise

– Oil facilities and pipelines are sabotaged regularly

These conditions do not lead to booming economies.

So, should I invest in the Dinar?

Its up to you and I am not liscensed to give financial advice
but…..ask yourself the following questions:

1. If the Dinar was going to increase in value exponentially why would
anyone sell them to you in the first place.? Would you sell something
for a few dollars if you knew you could get thousands of Dollars for it
in the next few years?
2. For you to sell, someone has to want to buy. Who? The mainstream
financial players won’t touch the Dinar with a bargepole. Any large
scale investor would take one look at the political situation and run a

The fact is that we are decades (if not longer) from political
and economic stabilty in Iraq. And the oil (if and when it can be
securly delivered) will firstly go to paying off Iraq’s historical debt.

So just accept the fact that if you have some Dinars and you paid good
money for them you have been scammed and learn from this. What you
don’t want to do is to continually hope for the miraculous RV as to do
so merely means that the scammers are continuing to ruin your life –
just forget it and move on!!!


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