By John Lee.
Iraq is considering replacing its current banknote series with a new issue, aiming to withdraw counterfeit, damaged and stolen notes from circulation and draw hoarded cash back into the banking system.
According to 964 Media, discussions within the Central Bank of Iraq (CBI) and the parliamentary Finance Committee are focusing on a full currency replacement rather than a redenomination removing zeros.
An anonymous member of the parliamentary Finance Committee told 964 Media that talks are currently orientated towards issuing new banknote denominations and a broader currency change, with the option of removing zeros ruled out for the time being. The member said a new banknote series could modernise security features, eliminate counterfeits, withdraw worn notes, and address currency stolen or circulating outside the financial system.
Under proposals still under discussion, routine amounts would be exchanged straightforwardly, while large sums would require account opening, deposit, know-your-customer checks, and proof of funds source rather than direct cash-for-cash exchange. The threshold under discussion is reported to be in the range of IQD 100-150 million (USD 76,000-115,000), though no final figure has been agreed.
The committee member said initial estimates suggest the exercise could recover IQD 20-25 trillion (USD 15.3-19.1 billion) of currency currently inactive within the financial system, whether due to wear, counterfeiting, or hoarding. Estimates also suggest that around 25 percent of those who enter the banking system to exchange notes may leave some or all of their funds on deposit rather than withdrawing cash again.
More than IQD 100 trillion (USD 76.3 billion) is estimated to be held outside the banking system, split between daily circulation and cash hoarded by individuals and businesses. Ali Abd al-Ridha al-Alwan, director of the state-owned Trade Bank of Iraq (TBI), recently warned that more than 85 percent of the monetary mass sitting outside the banking system was breaking the liquidity cycle and depriving banks of funds needed for economic activity.
The committee member noted that a successful currency replacement would require an adequate transition period, mechanisms to avoid disrupting markets, accessible procedures for ordinary savers, and bank readiness to receive the expected surge in deposits.
(Source: 964 Media)
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