Monday, Mar 15, 2010
Central Bank of Iraq is planning to rebase the Iraqi dinar but hasn't decided yet on the timing of the move, the bank said in a statement Monday.
"The Central Bank affirms its commitment to its strategic projects, particularly knocking three zeroes from the Iraqi dinar," the statement said.
"Despite the technical and logistical preparations for the project we have yet to decide on suitable timing to implement the project," it said. Choosing a suitable time wouldn't be linked to economic aspects only, but rather to the security situation as well, it added.
Separately, the bank's senior advisor Mudher Qasim told Dow Jones Newswires that knocking off the three zeroes would improve the value of the Iraqi dinar which is trading Monday IQD 1,170 against one US dollar.
If the rebase decision is taken it means a current 25,000 Iraqi dinar banknote will become IQD25, and a dollar will equal only 1.17 dinars
This is very confusing. Why would they say a 25000 note will become 25. This is not the same as getting rid of the 25000 note and introducing a 25 note. I remember EMA saying there is a translation issue when they say "dropping the zeros", however, it is very clear in this sentence above, they say a 25000 note will BECOME a 25 note. CAN ANYONE HELP HERE????.
The bank said that knocking off three zeroes from the dinar would "improve management of the currency and facilitate cash dealing." The decision was the result of debate with the economic commission at the Iraqi cabinet, it added.
Currency rebasings are usually monetarily neutral and are introduced to make commercial calculations easier and cheaper. Turkey, for example, knocked six zeroes off its lira currency in 2005. Russia did the same for its currency.
Qasim said one of the reasons for rebasing the Iraqi dinar is because the bank has managed to reduce the country's high rate of inflation. The inflation rate fell to 6.1% in December 2009 from a record high of 60% in late 2006.
In July 2004, the now dissolved U.S. civilian authority in Iraq decided to print the current Iraqi banknotes replacing those that used to bear the picture of the former Iraqi leader Saddam Hussein. Iraqis then had three months to swap their old dinars with the new ones.
The central bank's advisor said that if the project was implemented the central bank would need to print new banknotes.
