The Ongoing Iraqi Dinar Revaluation

by Susan Paige on February 7, 2019 · 0 comments

The Iraqi dinar has been going through a lot of ups and downs over the past few decades with a prolonged war and other issues deeply affecting the nation’s economy. This has long been the case, but it now looks like Iraq is set to revaluate its currency over the next few months. The Iraqi government has already been looking to adjust the exchange rate of its dinar over the past little while. So many signs point to a significant change in the Iraqi currency anytime soon.

As it stands, the Iraqi dinar has a somewhat undervalued exchange rate; $1 American is worth about 1,191 Iraqi dinar meaning that the Iraqi dinar value still has quite a way to go before becoming somewhat even with the majority of other world currencies. However, this is expected to happen relatively soon. President Donald Trump has promised the vast majority of currencies will be on an even playing field by the time he’s finished in the White House and this has many investors optimistic.

Because of that, many Trump supporters have been buying up Iraqi dinar over the past several months as somewhat of an investment. This has helped Iraq to build up its reserves and fund some advances in the economy over the past several years. But before we get to that, it’s worth taking a look at what a revaluation actually is and how it might affect the overall economy.

What’s A Revaluation?

A revaluation is essentially a change in a particular currency’s official exchange rate. This is normally done in contrast to other major world currencies, but can also be done in regards to gold, oil or other precious metals and resources. Normally, it’s either the country’s government or central bank that revaluates a country’s exchange rate, although it’s common to see both working on the issue at the same time.

A currency revaluation is extremely common, even among major currencies, and is normally done through a change to interest rates. This is typically done in order to bring foreign investment into the country. This may be why the Iraqi government is currently in the process of revaluating the Iraqi dinar as they’re currently trying to improve the economy and bring in significant investment from foreign companies. This is normally an informal way of adjusting a currency’s value, but it’s pretty common across the world.

More formal ways of revaluating currency do occur, however. These are typically only undertaken when a country or an economy have undergone some drastic changes. This is especially true in Iraq with war having a massive role in the country over the past few years; the revaluation may be an attempt to get the economy back on its feet and help it to improve.

What May Be Affected By A Revaluation

Any change in the value of a currency can have some significant effects on other parts of the economy. The most notable of these is that it can affect the value of assets in that country. For example, let’s take a piece of land worth 100,000 Iraqi dinar when 1 US$ = 1,000 IQD. Should the exchange rate be changed to 1 US$ = 500 IQD, any assets in Iraq would effectively double in value. While this may be great for landowners and investors, it may not be great for people at the lower end of the system who may not feel the benefits of the change and instead be priced out of a property, etc. This is why many countries don’t change their exchange rates so drastically, which is why many do so in a smaller and more prolonged fashion.

Revaluating a currency’s exchange rate can also help bring in the likes of investors and large corporations to a country. We already mentioned that supporters of President Donald Trump were buying Iraqi dinars, but they’re not the only ones looking at the country’s exchange rate and currency. As the currency is set to normalize over the next few years, then it’s a great time for companies to purchase land and set up businesses there. Compared to when the Iraqi dinar has a better exchange rate with other major currencies, it’ll cost a fraction of the price to set up a business in Iraq now than it would in a few years.

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