Is the Iraqi Dinar a Wise Investment?

What does it mean to "invest" in the Iraqi dinar? In simple terms, it's the same as investing in any other currency. You purchase a certain amount of Iraqi dinar (IQD) by paying the equivalent amount of U.S. dollars (USD).

As with buying stocks, bonds, or other currency, you purchase dinar at a given price and then expect the price to rise. The real question, though, is not just "can" you invest in this particular currency, but rather "should" you invest. While Iraqi dinars could be useful to those living in or near Iraq, there are many reasons not to invest in it.

Key Takeaways

  • The Iraqi dinar is the currency of Iraq and can be exchanged for U.S. dollars.
  • Hopes that Iraq's economy can recover from civil and regional wars have led to some speculation that the Iraqi dinar can increase in value against the dollar.
  • However, major banks and brokers do not offer trading of the IQD/USD pair, and transactions are placed through money exchanges, which charge hefty fees.
  • The value of the Iraqi Dinar is set by the Iraqi government.
  • Iraq's currency faces many challenges and much uncertainty in both the short and long run.

Understanding the Iraqi Dinar

Following the 1991 Gulf War, the economy of Iraq languished due to U.N. sanctions and official corruption. As the government of Saddam Hussein struggled to contain inflation and speculation, the Iraqi dinar to fall from its pre-war value of $3.00 to less than a penny in 1993. By 1994, the inflation rate reached more than 448%.

When the U.S.-led coalition overthrew the Iraqi government in 2003, the old dinars continued to circulate until the interim government launched a new currency the following year. New dinar notes were printed in the U.K., and exchanged at par value for Saddam dinars.

The fact that the new government was supported by several global powers raised hopes that the Iraqi economy would soon turn up, especially after the economic isolation that the country suffered through the 1990s. By 2007, the International Monetary Fund wrote approvingly of the Iraqi government's anti-inflation measures, noting that "the central bank of Iraq raised its policy interest rates sharply and allowed a gradual appreciation of the dinar."

As the Iraqi economy began to recover, many speculators began to buy large amounts of Iraqi dinars, expecting the currency to continue to rise. Some pointed to the rise of the Kuwaiti dinar after the Gulf War as evidence that the Iraqi dinar could experience similar success. At the same time, several U.S. regulators warned of scammers selling dinar "investments" for inflated rates and fees.

The Iraqi Dinar does not trade on the global forex market. This means that the only way to "invest" in dinars is through high-fee money changers or the black market.

Advantages and Disadvantages of Investing in the Iraqi Dinar

There are some reasons to be optimistic about the future of the Iraqi economy. With 9% of the world's oil reserves, Iraq has the potential to spring back and establish itself as a stable economy. That will require a peaceful, promising business atmosphere to establish investor confidence and revive its economy.

But that does not necessarily mean that buying dinars is the best way to bet on the Iraqi economy. For one thing, the Iraqi dinar does not float freely: the exchange rate is fixed by the central bank, meaning that the currency is unlikely to see any rapid changes in value. In contrast, a more traditional investment vehicle–like Iraqi stocks–could offer returns even if the value of the dinar remains unchanged.

Moreover, legitimate trading volume is extremely low; the IQD is not traded on the global forex market, and only a handful of Middle Eastern banks are willing to trade in it. If you have to buy Iraqi dinars, you can buy them only at select money exchangers, who may or may not be legally registered. These brokers may charge up to 20%, for such transactions, eroding the profit potential even for short-term trading.

But perhaps the largest concern is the number of scams and frauds concerning the Iraqi dinar. Several state regulators have warned about currency "brokers" promising high returns, while charging hefty fees for hard-to-sell dinars. This scam proved particularly popular after the 2016 elections, amidst rumors that Donald Trump would somehow cause the currency to soar.

Pros and Cons of Iraqi Dinar Investment

Pros
  • Iraq has large oil reserves that could support economic growth.

  • For those living or working in Iraq, buying dinars could be a suitable investment.

Cons
  • IQD has very little legitimate trading volume.


  • IQD exchange rate is fixed by the central bank and does not float with the market.

  • Many scammers have offered overpriced IQD "investment packages" to speculators abroad.

  • IQD does not trade on global forex markets, meaning the only way to buy it is through high-fee money exchanges.

How Much Is the Iraqi Dinar Worth?

One U.S. dollar is worth 1,469 Iraqi Dinars, as of May 15, 2022.

When Will the Iraqi Dinar Revalue?

The value of the Iraqi dinar is unlikely to change before 2026. In March, 2021, a spokesperson for the Iraqi Central Bank announced that the currency would remain fixed for the next four years. Later that year, another government official confirmed that the exchange rate had been established in government budgets.

Who Sets the IQD Exchange Rate?

The value of the Iraqi dinar is fixed by the Iraqi government and does not change, unless the central bank changes the exchange rate. This means that the government decrees the price for sale and purchase of the currency.

The Bottom Line

How Iraq, its economy, and hence the forex rate develop over the long term, is a long-term uncertain bet. In addition, trading forex currencies is always risky, as external factors at international levels are difficult to control or predict. Unless they are trading on regulated markets or through regulated agents, traders and investors should use extreme caution when trading the Iraqi dinar or similar currencies.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Macro Trends. "Iraq Inflation Rate 1960-2022."

  2. The New York Times. "Fortunes in Iraqi Bills Gone Overnight."

  3. CNN. "Saddam-Free Iraq Cash now Official."

  4. International Monetary Fund. "International Compact with Iraq, Statement by Mr. Takatoshi Kato, Deputy Managing Director of the International Monetary Fund, Sharm el-Sheikh, Egypt, May 3, 2007."

  5. ABC News. "Betting Millions on Iraqi Money."

  6. USA Today. "These 15 countries, as home to largest reserves, control the world’s oil."

  7. Newsweek. "Donald Trump Supporters Think President Will Make Them Rich If They Buy Iraqi Money."

  8. CNBC. "Inside a $24 million investment scam: Buy the Iraqi dinar."

  9. CNBC. "Inside a $24 Million Investment Scam–Buy Iraqi Dinars."

  10. XE.com. "Convert Iraqi Dinars to US Dollars."

  11. NRT. "Current Iraqi Dinar's US Dollar Peg Will Be Fixed in 2022 Budget Bill."

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