If you think the Iraqi dinar could soon be worth a pretty penny, think again. Speculators have been hoping for a currency revival ever since the invasion of Iraq, but so far those hopes have yet to materialize. Instead of making bank, a careless investment could turn into a stack of worthless paper.
- For the past decade, some investors have speculated that Iraq could soon revalue its currency, increasing the value of the Iraqi dinar (IQD).
- This idea has given birth to many "investment" scams, promising 1,000-fold returns to investors who buy dinars at a steep markup.
- A currency revaluation seems unlikely, due to economic turmoil and the difficulty of trading the money outside of Iraq.
- Ultimately, Iraq ended up devaluing its currency in 2020, meaning that anyone who had invested in 2014 would have lost at least 20% of their money.
- There are no signs that Iraq may revalue the dinar in the immediate future.
Investing in the Iraqi Dinar
The Iraqi dinar has a fixed exchange rate, meaning that the central bank determines its official value for cross-currency transactions. Rumors of an (IQD) revaluation have been around for a number of years and they continue to attract a substantial number of believers. Scores of people have purchased Iraqi dinars from fast-talking promoters and online currency dealers promising windfall profits—some predicting as much as 1,000 times their original “investment”—when the currency is revalued.
This belief in a dinar revaluation is based primarily on the fact that Iraq has the world’s second-largest oil reserves. Proponents of dinar revaluation also pointed to the surge in value after the first Gulf War of the Kuwaiti dinar, which is now one of the world’s most expensive currencies on the forex market.
Several state governments have warned about "investment" frauds targeting gullible investors. These scammers promise windfall gains on the dinar, which they sell at a steep markup.
In some cases, expectations of a revaluation were also drummed up by scammers, selling easy riches to gullible investors. As far back as 2011, regulators in Washington State warned investors about the new scam centered on the Iraqi dinar. In 2015, a group of con artists made off with $24 million after pitching a get-rich-quick scheme complete with fake war heroes.
Like many investment schemes, the Iraqi dinar hustle is not limited to any one group. Three years later, the play was still going strong among gullible Trump supporters, who believed (mistakenly) that the president had invested as well.
Criticism of Investing in Iraqi Dinars
In 2014, the official exchange rate between the Iraqi dinar and the U.S. dollar was set at around 1,160 IQD per U.S. dollar, and for a few months in late 2015, the value of the dinar did increase. However, if you had invested then, you would have actually lost money. The currency was revalued in 2021, at a new rate of about 1,460 IQD per dollar. If you had bought dinars in 2014, you would have lost about 20% of your investment.
And, as of 2022, there are few reasons to expect anything to change. Here are a few more reasons to think twice about the Iraqi currency.
Iraq's Economy Is Struggling
The Iraqi economy was on the upswing until the assault of the Islamic State of Iraq and Syria. Although ISIS was defeated in 2017, the country continued to face crisis after crisis. In 2019, the country was shaken with enormous demonstrations and strikes against the perceived corruption of the Iraqi government. The following year, the country teetered on the brink of war, following the assassination of a top Iranian diplomat by U.S. forces and the subsequent bombing of two U.S. bases by Iranian forces.
In February of 2020, the first case of COVID-19 was discovered in Iraq, quickly exploding into a nationwide outbreak. Soon after, the World Bank predicted that Iraq's poverty rate could double to 40%. When the country’s very survival is at stake, currency revaluation is very unlikely to be on the agenda.
Iraqi Dinars Are Hard to Trade Outside of Iraq
The value of the dinar is set through an auction process by the central bank of Iraq. As the dinar does not trade on global forex markets, its value is set by government edict rather than by supply and demand as it is for freely traded currencies. This also means that so-called dinar dealers can charge any rate they desire to unsuspecting investors.
An investment in Iraqi dinars could be particularly difficult to offload, especially for Americans. Since dinars do not trade in global forex markets, they cannot be redeemed anywhere except in certain banks in the Middle East.
Iraqi dinars do not trade on the global forex market, and can only be exchanged at certain Middle Eastern banks.
A prospective investor might also lose value to inflation, due to the falling value of the currency within Iraq. Inflations shot up to 6.44% in 2021, and it is expected to remain above 4.5% for the duration of 2022.
This may not seem like an unduly high rate, but it's higher than that of advanced economies. For comparison, the U.S. Federal Reserve targets 2% as the ideal inflation rate. Depending on how well Iraq survives the pandemic, prices could rise even higher, and those increases might reduce Iraq's willingness to revalue its currency.
What Is the Latest on the Iraqi Dinar Revaluation?
In late 2020, the Iraqi government announced a 20% devaluation of the Iraqi dinar, in order to make up for a shortfall in liquidity. The act resulted in public protests in a country that was already struggling due to the worldwide pandemic.
How Do I Invest in Iraqi Dinar?
Most U.S. banks and financial institutions do not permit trades in the Iraqi dinar, but they can be acquired through some currency exchanges. These sites typically come with a warning or disclaimer, where the buyer must acknowledge the risks associated with the currency. Many exchanges, like Ceifx, explicitly warn buyers not to purchase dinars "unless you intend to travel there and use it as local currency."
Why Should You Invest in the Iraqi Dinar?
The only compelling reason to invest in the Iraqi dinar is if you intend to live or do business in the country of Iraq. Because the exchange rate of the Iraqi dinar is set by the country's central bank, it is unlikely that the Iraqi government will execute a sharp revaluation of the currency. Potential investors should weigh these gains against the considerable costs and risks of acquiring the currency.
What Was the Highest Value of Iraqi Dinar?
The Iraqi dinar reached its highest value against the U.S. dollar in January 2016. At that time, the dinar was trading at about 1,090 dinars per $1 U.S. dollar.
Should I Sell My Iraqi Dinar?
If you hold Iraqi dinars and do not live in or near the Middle East, the currency is difficult to trade and is cannot earn interest. Although it is possible that the dinar could rise in the distant future, there are many other investments with lower risks and higher rewards.
The Bottom Line
Buying the Iraqi dinar might make economic sense—if you happen to live in Iraq. For those outside the country, investing in the currency comes with steep risks, and the country's economy is still a long way from recovery.