Iraqi Dinar - The Role of Oil, Politics, and Foreign Investment

There have been many developments in the Iraqi economy since the 2003

. Efforts of the nation's government and foreign aid have focused on the following goal: increasing security and stability in Iraq via legitimate political representation, infrastructure building, and economic growth.

Possible domestic capital markets were created with the objective of cutting down their massive pre-war debt. The Paris club was generous enough to forgive 80% of Iraq's debt. Their policies towards growth and their near future economic stability attract investors worldwide.

Foreign bank licenses were also issued after many decades to banks such as HSBC, National Bank of Kuwait, Commercial Housing Bank, Iranian National Bank, Bahraini Arab Banking Institute and Standard Chartered bank. Interest rates were further liberalized in the aim to form a vibrant free market economy. The rejuvenated banking system was expected to have a positive effect on the value of Dinar. Besides, the Central Bank of Iraq became an independent agency, without influences from political parties of Iraq.

The Iraqi Dinar was being traded at 3.35 per US dollar before the sanction of United Nations and at 0.33 per US dollar before the Iraq war. The Iraqi Dinar was affected mostly by the major combat operations of the nation and had declined to an all time low value.

After the combat operations, however, the government succeeded in bringing up the currency value by 25% and currently the value of Dinar is 1400 against the USD, an enormous increase from 3500 against the USD during the US invasion. Even Germany and Kuwait underwent a similar devaluation postwar but both recovered.

The recovery of Iraqi Dinar is astonishing and the Iraqi government's efforts towards global market integration will still spur the value of the currency. Iraq after recovery is also expected to benefit from its abundant natural resources.

Iraqi Dinar - The Role of Oil, Politics, and Foreign Investment

By: Stefano Grossi

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