The dinar is the official currency of Iraq. The current incarnation of the Iraqi dinar was introduced in 2003 by the Coalition Provisional Authority after the deposition of Saddam Hussein. The value of the dinar is held through a regimented exchange rate program set by the International Monetary Fund (IMF) in conjunction with the Central Bank of Iraq, the issuing agency of the dinar. In a statement released by the IMF, the exchange program has been set since 2007 in an attempt to produce a gradual appreciation in the value of the dinar while fighting off dollarisation, or the widespread use of foreign currency. While some speculators have announced optimism for Iraq’s currency, many are still wary due to continuing political and economic volatility.
The first dinar was introduced in Iraq in 1932 as a replacement of the Indian rupee, which had been used since the British occupation of the country during World War I. At introduction, the first dinar was valued at 1 dinar: 13.33 rupees and was pegged on par to the pound sterling. In 1959, the peg was changed to the U.S. dollar at 1 dinar: 2.8 USD. During the Gulf War, a wide discrepancy in the official exchange rate and the black market exchange rate existed. Although the official value of the currency was 3.22 USD, the black market exchange rate was only 1 dinar: 0.33 USD. After the Gulf War, Iraq was forced to print its own banknotes. Government overprinting, U.N. sanctions and counterfeiting caused the value of the dinar to drop sharply. After the invasion of Iraq by coalition forces in 2003, new coins and banknotes were introduced at a one-to-one ratio to the old dinar, or 3683 dinar: 1 AUD. At this time, investors were attracted to the new Iraqi dinar in anticipation of swift appreciation. As predicted, the dinar appreciated quickly to 1 dinar: 902 AUD, at which time it was brought under control through the IMF exchange program.
Coins had not been in use in Iraq since 1990, but new 25-dinar and 100-dinar coins were minted in 2004 when the new dinar was introduced. These coins ultimately proved unpopular and were subsequently withdrawn from circulation. Today, Iraqi dinar is circulated only through banknotes. Banknotes are now printed by the British printing company De La Rue using modern security features, and they printed in denominations of 50, 250, 500, 1000, 5000, 10,000 and 25,000 dinars.