Where did the project to delete the zeros of the Iraqi dinar arrive?

All plans could not save the Iraqi dinar from falling into the abyss (Al Jazeera)

19 countries have eliminated zeros from their local currencies at least once, while 10 countries have resorted to such a step twice since 1960, according to a study issued by Iran's Payam Nour University.

After the regime change in Iraq in 2003 and its transformation from a totalitarian regime to a democracy, successive governments after the American invasion worked intensively to determine the course of the local currency (the dinar) on a paved path against the American dollar, but all plans could not save the dinar from falling into the abyss until The exchange rate reached 1,650 dinars for every 1 dollar.

In the latest official press statements by the Governor of the Central Bank of Iraq, Dr. Ali Al-Alaq, he briefly said, “The project to delete zeros from the Iraqi currency is still in place.” But he did not explain many details about this project.

The Iraqi Central Bank refused to comment on Al Jazeera Net's inquiries about the implementation of the project at the present time or at a later time.

The government’s financial advisor, Dr. Mazhar Muhammad Salih, said, “The phenomenon of many zeros in the monetary unit or the addition of zeros usually comes due to the exposure of economies to wild waves of inflation or sharp rises that continue for years in the price level due to wars, sieges, and conflicts, which lead to financing the government budget deficit by issuing... "Cash."

The Iraqi dinar has fallen significantly against the US dollar (Al Jazeera)

In a previous interview - with Al Jazeera Net - Saleh explained that “price means the value of goods and services expressed in cash, and the continuous rise in prices without stopping leads to the erosion of the value of the monetary unit, which requires the issuance of larger cash denominations due to the lack of value of the smaller cash denominations and the disappearance of their ability to cover transactions.” and high value exchanges in the market.

Disturb the monetary system

Former member of the Parliamentary Finance Committee, Ahmed Hama Rashid, believes that “Iraq is not prepared for the project to delete zeros,” and he also said, “We always hear statements from the Central Bank to implement a project, only to withdraw after a while from implementation for unannounced reasons.”

Rashid said - in a statement to Al Jazeera Net - that "the costs of the project are very high, as printing one monetary denomination costs the Iraqi state 6 cents," noting that

"the volume of the monetary mass printed in Iraq is 92 trillion dinars, of which 45 trillion are in circulation in the market and banks."

He points out that "the project to delete the zeros will destabilize the monetary system, which may cause successive collapses," ruling out the possibility that the Central Bank would take such a step because "the dinar suffers from constant vibrations."

Interfering factors

Focusing on the circumstances of implementing the project to delete zeros from the Iraqi currency, we find banking consultant Abdul Rahman Al-Sheikhli identifying two factors that stood in the way of implementing the project.

Al-Sheikhli: The printing of the Iraqi dinar during the 1990s took place inside poor printing presses (Al-Jazeera)

Al-Sheikhli said in an interview with Al Jazeera Net, “The first factor that was standing in the way of the project was the discrepancy between the official exchange rate (now: 1,332 dinars per dollar) and the parallel market exchange rate (now: 1,530 dinars), which constitutes an obstacle to the implementation of the project.”

He pointed out that "the project will be successful if an exchange rate of one thousand dinars is reached for every one dollar. At that time, deleting the three zeros will achieve its economic feasibility, as the exchange rate will turn into one dinar for one dollar, and this is what the late former Central Bank Governor Sinan Al-Shabibi aspired to." ".

Al-Sheikhli added, “The second factor was represented by the call made by the government headed by Nouri al-Maliki (2006-2014) to legislate the infrastructure law, which was opposed by many political blocs in Parliament at the time because it led to an increase in investments in Iraq through the deferred payment method, and this is what limits the value of the cash project.” .

There is no strong productive sector

To search for the relationship in the stability of the dinar against the dollar, the academic in banking and financial sciences, Dr. Ahmed Al-Husseini, believes that there is no positive effect, explaining this to “the lack of a strong productive sector in Iraq.”

Al-Husseini said in a statement to Al Jazeera Net that "the Iraqi economy is a rentier economy that depends on one financial source, which is the export of crude oil," and that the project to delete zeros is linked to strengthening the real productive economic sectors such as industry, agriculture, trade, services, health, and education. "At that time, the project will have a positive impact on the stability of the national currency."

From the technical side, Al-Husseini acknowledges the importance of the project in order to reduce accounting numbers and facilitate accounting and the cost of managing large numbers.

Source: Al Jazeera