Dodgy Dinar: Fake Passports in Bogus Banking, Currency Crisis

By Mustafa Habib.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

During the past month of violence, the Iraqi dinar’s value has fluctuated radically. Now black market money men are using Iraq’s poorer passport holders to take advantage of a government measure to stabilise currency.

In the middle of a long queue waiting to enter a branch of the Rafidain Bank, Iraq’s state bank and its largest, is Baghdad woman who wished only to be known as Sadoun. She’s waiting in the queue to exchange her Iraqi dinars for US$500. Although she’s not saying so now, when she gets in there to the tellers, she may well pretend she is going overseas. She may even show her passport with a forged international visa stamped inside it. This allows her to take advantage of a recent government subsidy meant to artificially maintain the Iraqi dinar’s value; the state bank buys the dinars at a higher rate.

In Sadoun’s case, she will exchange IQD1,900 for one US dollar. In the unofficial exchange shops, which are found throughout Iraq, she would exchange around IQD1,200 for one US dollar. So that difference of around 10 percent makes the waiting in this queue worthwhile.

Sadoun is not the only person doing this. The fresh round of violence in Iraq which has seen over 500 dead in May, among other factors like politics, unresolved financial issues and regional conflicts, has caused dramatic fluctuations in the value of the dinar against the US dollar. Most Iraqis use dinars for small purchases, like groceries, but use US dollars when buying bigger ticket items – one of the main reasons for this is that they don’t need to carry around bags of cash in dinars, they need only take several bills in a wallet.

As local economist Majid al-Suri told NIQASH, “the decline in the dinar against the US dollar since April can be attributed to many political issues, as well as security and financial administration problems. This has seen many merchants and businessmen transfer money outside the country, exchanging their Iraqi dinar for dollars because they’re afraid the dinar will only become more unstable. A few months ago, Iraq’s central bank was selling around US$50 to US$150 million a day,” al-Suri explained. “Now demand has increased and it’s selling more than US$400 million a day. That’s a huge increase.”

2 Responses to Dodgy Dinar: Fake Passports in Bogus Banking, Currency Crisis

  1. kattan 2nd June 2013 at 20:58 #

    Abdel Basit Turki needs to resign as the list of his embarrasing mistakes is getting longer by the day.

    I really miss Governor Sinan Al-Shabibi's administration as the dinar remained stable during the 2006-2007 sectarian strife, remained stable when the Syrian civil war broke up and when the sanctions on Iran were fully imposed. The impact of these events were minimized on the iraqi citizen.

    Abdel Basit Turki has been in charge since last october and the result is Dodgy Dinar, Fake Passports in Bogus Banking, and a Currency Crisis

  2. Toufic 5th June 2013 at 06:43 #

    Simply put, having two monetary systems is the problem. Iraq should look around and learn from the neighoring systems. Lebanon is only the country that allows a dual monetary system, and look at the fate of its currency. Iraq should stop the dual system, banks should stop being exchange shops, and exhcnages should apply official rate for USD/IQD until the rate is fully flaoted. Banks should only accept and dispense Iraqi Dinars, while depositors can have accounts in any foreign currency they prefer. Another thing, the government should stop runing commercial banks. Al Rafidain, Al Rasheed, TBI and the other smaller state owned banks should be valued and sold to public and listed on the stock exhcnage or shut dissolved if their business plan prove uneconomic. Private sector is always more efficient when it comes to managing and corruption will be hugely reduced.