Iraqi Dinar Discussion Board

[Aerospace]

Pre war dinar value... more.

(http://www.export.gov/iraq/pdf/crs_iraq_economy.pdf).

“This report was originally prepared at the request of the Senate Committee on Foreign Relations. With the Committee's permission, it is being made generally aailable for the use of Members.”

Currency and the Balance of Payments: The Iraqi dinar was long considered a strong currency aided by oil revenues and rising foreign exchange reserves. Some of this reputation may be attributable to the decision, by the National Bank of Iraq in the 1950’s, to maintain 100% reserves behind outstanding domestic currency.30 The official rate was variously set between $3 per dinar to $3.38 per dinar in the 1970s, the last official rate of $3.11 per dinar was set in 1982. During the 1970s, the official and markets rates generally corresponded and by 1980 the country had $35 billion in foreign exchange reserves. By 1987, that figure had fallen to $2 billion. The currency depreciated steadily during the Iran-Iraq war, and the pace of descent quickened after the first Gulf war. One estimate had the currency depreciate from 4 to 8 dinars per dollar in 1990-91. The advent of sanctions paradoxically stabilized the currency for a brief time as foreign exchange transactions virtually ceased. However, the onset of limited food and medicine trade under sanctions renewed the downward slide. The dinar reached an all-time low of 2,660 per dollar in December 1995. It has slowly appreciated from that low, yet has fluctuated widely from 1,000 to 2,300 dinars per dollar in the period 1997-2001 on the black market.

Inflation: As with other indicators, data on inflation are spotty and, during the 1990s, price data have a highly anecdotal quality. Before the oil boom, the Iraqi economy was characterized by price stability with an inflation rate at 5-6% during the period 1960-73.34 This source calculates inflation increasing from 18% to 68% between 1975-79 as a consequence of substantial currency inflows related to the oil boom.35 Prices continued to rise during the Iran-Iraq war as resources were diverted toward the military and government borrowing from the central bank expanded the monetary base. Inflation was recorded at 95% in 1980 and had increased to 400% by 1989. During the 1990s, a period of hyperinflation occurred. The government continued to print money to meet expenditures while economic sanctions shut off the supply of imported goods leading to a classical monetary overhang. A yearly inflation rate of upwards of 2,000% per cent was reported in open market food prices between 1990-1991.36 Another source estimated that inflation increased 5,000% between 1990and 1995.