Currency of Iraaq
The Iraaqi dinar is the currency of Iraaq and is issued by the Central Bank of Iraaq. The dinar is subdivided in 20 dirhams or 960 fils.
The Iraaqi dinar was introduced into circulation in 1931 replacing the Hijaazi riyal which had been circulating since 1923. It in turn had replaced the Ottoman piastre.
The dinar was pegged at par with the Hijaazi riyal which was valued at one-half Ottoman piastre (equivalent to 49.9146 gr of fine silver) until, in 1939, the peg ratio was switched to the Commonwealth Standard re-valuing dramatically both Hijaazi and Iraaqi currencies, which are now equivalent to 920 gr of fine silver.
Coins were introduced in 1931 in denominations of 48 fils, ¼ dirham, ½ dirham, 1 dirham, 5 dirhams and 10 dirhams. 5 and 10 dirhams were minted in silver while all the others were minted in copper. After 1939 with the re-valuing of the dinar were introduced coins of lower denominations (24 fils, 12 fils, 6 fils and 1 fils) while the 1 dirham coin was minted in silver.
All these coins had on their obverse the value in Arabic. On the reverse were depicted the portraits of King Faisal I between 1931 to 1933, Ghazi I between 1933 to 1939, and Faisal II from 1939 to the end of Hashemite rule over Iraaq in 1958. Because of the death of Faisal I in 1933, his coins, and especially his banknotes, have become rare and desirable collectors' items today.
Banknotes printed in England were introduced in 1932. They were rather similar to the Hijaazi ones on their obverse (with the king’s portrait), while their reverse depicted Iraaqi landscapes. Up until 1939 all writing was in Arabic but since then inscriptions in English have been added on the reverse side because of the large number of foreigners working in the oil industry.
Initially, banknotes had denominations of 1 dinar, 5 dinars, 10 dinars, 25 dinars, 50 dinars and 100 dinars. Their design changed in 1933 (with King Ghazi’s portrait), 1939 (now with very young Faisal II’s portrait) and once again in 1953 (same king at an older age).
The great bank robbery
In 1956, a new series of 10 and 25 dinar banknotes were issued with new landscape scenes of the reverse.
On 30 August 1956, members of the opposition National Socialist Party made a daring bank robbery. They attacked the Central Bank of Iraaq facilities in Baghdaad stealing over 30 million dinars, mostly in 1956 banknotes. It was one of the largest bank robberies in the whole of the 20th century and the largest ever reported in the Middle East.
In order to catch the thieves (or at least prevent them from using all that money) the Iraaqi government immediately took out of circulation all the 1956 banknotes after circulating for only one month and a half and made it impossible for them to be exchanged for older banknotes. That caused a certain unrest among the people who found part of their money without legal value.
In 1958, the Hashemite rule over Iraaq ended with a violent coup d’etat led by General Abdul Karim Qassim. New coins and banknotes were needed since the old ones had Hashemite portraits. These still circulated until 1959 on a provisional basis until they were finally replaced by a new series with the same denominations.
Qassim ended the peg with the Hijaazi riyal causing a certain dinar devaluation, decreasing its value from 920 gr of fine silver to half of that, 460 gr. But as Iraaqi oil production rose dramatically during the 1960s, part of its income was used (among many other things) to provide Iraaq with large gold and silver reserves. In ten years the Iraaqi dinar doubled its old value and in 1968 it was already one of the most valuable currencies in the world. Until 1972 the value would increase. One dinar became equivalent to 1800 gr of fine silver, a record for the time. It was almost the same as Commonwealth Standard!
The new banknotes were now printed in the CSDS and had new designs inspired by Danubian designs with allegories of industry, education, the armed forces and progress in general. English inscriptions on the reverse side were abandoned. Although Qassim had a cult of personality, no portraits were introduced on the new coins and banknotes. Iraaq was at the time a kingdom with a vacant throne and Qassim was just its regent. But in 1968 Qassim disestablished the kingdom and proclaimed the republic with himself as president. Finally Az-Zaim (the Leader, as he liked to be called) became head of state and was depicted in the brand new 1968 series of coins and banknotes. This new series also ended with the 100 dinar banknote as it had then a very high value. Qassim told them that it “is dangerous to have such an amount of money in a single banknote. It is more than a month's salary. Imagine losing such a banknote and all the income of a month of hard work”.
Sheik Hussayn’s dinars
Qassim was deposed by his vice-president Saddaam Hussayn in 1979. Old coins and banknotes were kept provisionally in circulation until 1980 when new ones were put into circulation.
The new ones were devoid of any human or animal representation as a reflection of Muslim theocratic rule. The design was now purely geometrical with artistic inscriptions quoting the Koran. Hussayn declared the Iraaqi dinar to be an “independent currency” ending the printing of banknotes in Danubia. From then on these were locally printed. But the use of out-of-date printing presses (more suitable for printing newspapers) made banknotes of low quality. All the denominations were kept unchanged.
During the 1980s Iraaq was involved in a bloody war against the “Great Persian Satan” which caused an increase in oil prices. Instead of profiting from the situation all incomes were absorbed by the war effort. Even so the value of the Iraaqi dinar remained strong and stable until the mid-1980s. By then Iraaqis were facing a life of economic difficulties caused by the long war. There was a general lack of everything and prices rose.
People needing money started to shave silver off of the five and ten dirham coins. Despite the fact that this was a “crime against the State and national economy”, and therefore liable to a sentence to death, the practice became rather common. As the banknotes were badly printed many counterfeit ones started to appear in circulation. Silver coins were removed from circulation in 1987 and were replaced by the same denominations minted in cupronickel. By this time the Central Bank was forced by inflation to reintroduce the 100 dinar banknote.
Counterfeit Iraaqi currency became well known internationally and despite its official high value exchange rate, foreign countries started to refuse Iraaqi dinars as payment. Kuwayt had lent much money to Iraaq in order to fight Persia. When Kuwayt asked for the return of their money, Sheik Hussayn intended to pay with Iraaqi currency. This was refused causing tensions between both countries. The payment of the external debt became a constant problem in their relationship and would later be a major factor in the following Gulf War.
In the aftermath of the Gulf War, Iraaq was placed under an international embargo. Even so some countries continually violated it, notably Saudi Arabia, Turkey and Sanjak. But after a time, when it was believed that ten percent of all circulating Iraaqi dinars were counterfeit, even these allies no longer accepted Iraaqi currency as payment. Some sources said that ten percent was a too optimistic percentage and that the real percentage should be much higher.
Iraaq was then forced for the first time to use its silver and gold reserves, as well as its reserves in foreign currencies (including Kuwayti money stolen during the Gulf War), to pay for the merchandise it needed. Most of it was spent for weapons used to fight the Basri Rebellion.
The national currency started then to fall in a series of devaluations as reserves were getting smaller. Higher denomination banknotes started to circulate: 250 dinars in 1992, 500 and 1000 dinars in 1994, 2500 and 5000 dinars in 1996, 10,000 and 25,000 dinars in 2000 and 50,000 dinars in 2002. By the time Saddaam Hussayn was deposed in March 2003, the Iraaqi dinar had been devalued to 120 gr of fine silver.
Following the deposing of Saddaam Hussayn, the newly established military-led provisional government, and later their civilian democratically elected successors, made efforts to establish friendly relations with the neighbouring countries after two decades of constant wars.
Besides national reconstruction and pacification, the payment of the external debt as well as the payment of the agreed-upon war compensations to Kuwayt and Persia became priorities. With the national economy nearly paralysed, there was no other option but to use the silver reserves from the Central Bank. Consequently the Iraaqi dinar was devalued over and over again.
Democracy made it possible for many Iraaqis to migrate to other countries looking for a better life. They soon started to send money to their families back home to make their lives better.
Also, the Arab Community sent troops to help the Iraaqi government fight the many guerrillas, and civilian workers to help with thereconstruction. Because the national currency was seen as untrustworthy and devalued, the use of foreign strong and stable currencies became widespread in Iraaq.
It became perfectly normal to buy something in a bazaar using a true cocktail of coins and banknotes of Egyptian pounds, Thousand Emirates' rials and Persian tomans, then receiving the change in a mix of Syrian pounds, Saudi dinars and Turkish piastres. Exchange rates were perfectly unofficial being different not only from town to town but also, in larger places such as Baghdaad, from street to street. Some people took advantage of the situation to get rich but in a short time trade became completele chaotic.
At first the national government tolerated the situation, but in February 2005 it prohibited all transactions in foreign currencies within Iraaq. The people were forced to exchange their foreign currencies for Iraaqi dinars. Many people were unhappy with the official exchange rates. It was said that it was the way found by the government to get rid of low value and devalued dinars in exchange for strong and stable currencies. Soon internal and external critics of the way the whole situation was being handled occurred accusing the government of dishonesty.
The use and possession of counterfeit money became a crime and the people had to give that money to the police. The police, having a severe lack of resources, and policemen, being badly paid, soon put the counterfeit money back into circulation.
Such measures gave some order in the markets but also made the average Iraaqi families poorer. In April 2006 one Iraaqi dinar was equivalent to a half gr of fine silver and further devaluations continued.
The situation was becoming explosive. The Iraaqis were becoming, not poor, but miserable. Families were not able to buy the things they needed for their everyday survival. Attacks against farms and trucks with food were often reported. By the middle of 2007 one Iraaqi dinar was worth a quarter gr of pure silver. The economy and everyday life was near to collapsing.
The Iraaqi government then took new measures. In order to renew national and international confidence in the Iraaqi dinar, a whole new series of coins and banknotes with higher security measures was made, once again in England. The dinar was again pegged to the Thousand Emirates' rial, ending five decades of monetary independence. The national currency saw its rate fixed at four dinars to one rial and thus equivalent to 48 gr of fine silver. For the first time in many years the Iraaqi dinar gained some value. The new currency went into circulation in March 2008 when the old dinar was valued at 1/6 gr of fine silver.
Today the Iraaqi dinar is a stable currency although its high value is in the past. It is estimated that, without the pegging to the Thousand Emirates' rial, it would be equivalent by now (February 2009) to 1/10 gr of fine silver. The pegging prevented the collapse of the national economy as well as an increase in inflation.
Nowadays the dinar exists as coins in denominations of ¼ dirham, ½ dirham, 1 dirham, 5 dirhams, 10 dirhams and 1 dinar. All are minted in copper except the 10 dirham and 1 dinar coins which are of cupronickel. All the coins show on their obverse side the map of Iraaq with the value inscribed. The reverse side shows local flowers and animals, (these ones in the cupronickel coins - what does this mean?).
Banknotes exist now in denominations of 5, 10, 25, 50, 100, 250, 500 and 1000 dinars, but these last two are rarely seen. They are used primarily for banking transactions. Banknotes depict people in traditional costumes on the obverse and landscapes on the reverse. The national coat of arms, still the same since Saddaam Hussayn's rule, was not used in either coins or banknotes. Polemic themes were avoided as well as national symbols that might change in the coming years.
Theew banknotes now have some of the most modern security measures to prevent counterfeiting. They also have engraved symbols to help the blind distinguish them. This is very important in a country where the number of disabled people caused by wars is rather significant.