The political impasse in Iraq has been frustrating for all parties involved, particularly Iraqi citizens. The Iraqi people have been frustrated by the lack of leadership by all sides to come together to form a unified government that will work for the benefit of Iraq as a country. It has been five months since the March 2010 elections were held, a landmark achievement for Iraq. However, no formal government has been established. The deadlock primarily between Nouri al-Maliki and Ayad Allawi as to who will take over the premiership and have the first chance to form a government has stalled all political progress. In addition, there have been some concerns about the stability of Iraq as U.S. troops withdrawal to a non-combat level by the end of August 2010. As Iraq embarks on a new chapter, the Iraqi dinar has been a widely discussed topic.
Many Iraqi dinar speculators have invested in the dinar to take advantage of its historically low value. Currently, the exchange rate according to the Central Bank of Iraq is 1,170 Iraqi dinars to $1. This is in stark contrast to historically high values before the Gulf War of around 1 Iraqi dinar to $3. However, these low values have made the Iraqi dinar an enticing and exciting opportunity. Dinar speculators are looking forward to Iraq stabilizing as a country and waiting for the Iraqi dinar to be on the open market. Currently, Iraqi dinars can only be purchased from private dealers like Dinar Profits since commercial banks have stopped carrying the dinar. Since the dinar is not listed on a foreign exchange, banks do not have an urgency to carry the dinar. Dinar investors are waiting for the dinar to be publicly traded so that market forces will determine the value of the dinar.
So the question is, when will the Iraqi dinar be publicly traded? No one knows exactly when this will happen, however, there are some key events that one can look as indicators. First of all, a formal, stable government needs to be in place. Part of the reason why commercial banks have stopped transactions with the dinar (dinars were last available at commercial banks around 2004-2005) is because of Iraq’s instability as a country. After the fall of Saddam Hussein in 2003, Iraq has been strife with war, violence and insurgency. The war in Iraq has progressed to a point where U.S. troops are pulling out to non-combat levels by the end of August 2010. However, even after the historic elections in March 2003, no government is in place. Without a formal government in place, the banks view the Iraqi dinar as unstable.
In addition, it is yet to be seen how Iraq’s future will be shaped after the U.S. troops pull out. First, when will a government be formed? The next question, might be the most important question – will Iraq be able to protect and secure its borders and infrastructure after U.S. troops leave? There have been concerns that Iraq does not have the man power, resources and training to protect its country in a region littered with missiles and territorial aggression. Forming a government is the first step, but will Iraq be able to support a safe and stable environment for its people to thrive? The value of the Iraqi dinar is directly tied to the strength of Iraq. It will be up to Iraq and the international community to support Iraq in this critical time to provide infrastructure and basic needs for Iraqi citizens and Iraq as a whole to prosper.
Financial experts and the economists are of the opinion that the economy of Iraq will bounce back and the Iraqi Dinar will revalue and reach a value of three Dinars per one U.S. dollar. They believe that the economy of Iraq is likely to reach good heights by 2013. Currently, the worth of one million Iraqi Dinars is less than thousand US Dollars. There was a time when the worth of one million Iraqi Dinars was equivalent to 3,000,000 US dollars.
Remember, Iraq was has vast reserves of crude oil and many areas Iraq has not been geologically explored using the latest and modern seismic techniques. Today, Iraq has minim of 115 billion barrels of crude oil reserves and this figure is as per old surveys. However, the government of Iraq has publicly stated that Iraq has large reserves of petroleum and its reserves could be the largest in the world.
Financial analysts are of the opinion that even if the worth of the Iraqi Dinar were valued at 0.26 U.S. Dollar (this is the lowest valued currency of the mainstream Middle Eastern Countries) then one million Dinars would be equivalent to 260,000 US Dollars. The studies show that since late 2003, the economy of Iraq has shown signs of recovering and there has been a steady increase in the conversion of natural resources. This in turn has steadily increased the value of currency.
One also needs to remember that there is a global oil shortage and the prices of crude oil are soaring. Today, currencies of the oil-rich Middle Eastern countries are much higher than the Iraqi Dinar. The economies of India and China are growing and will continue to grow. And there will be great demand for oil which will increase the value of the bank notes. Hence, there are strong indicators that the currency will continue to grow in value and be revalued to keep up with the growth of the Iraqi economy.
One needs to remember that Iraq is a strategically located Middle Eastern Country. A valued asset of Iraq is its numerous oil wells. Therefore it is in the best interest of the other Middle Eastern nations, as well as the Western nations, for Iraq to establish a stable economy. It is a political truth that no country whether it is Western or Middle Eastern is going to allow the natural wealth of Iraq to fall into the hands of corrupt government leaders or radical segments of the population.
Iraq has a very high quality crude oil which is extremely cheap. Since there are very few impurities or hindrances in drilling crude oil, the cost of production is very minimal compared with the other oil producing countries. That is the profit margin of oil production in Iraq is considered to be highest in comparison with the neighboring countries. Therefore, once the economy stabilizes, the potential GDP rate is going to be very high compared to the rest of the region.
It is also worth mentioning that financial entities such as WTO (World Trade Organization) and IMF (International Monetary Fund) along with other world banking organizations like the World Bank are working in conjunction with the government of Iraq to stabilize the financial system and also make it in par with other countries. Once this happens, the value of the Iraqi Dinar will increase in value. It is also believed that with an increase in the value of Iraqi Dinar, there will be more investors and currency traders in the financial market and this will create a free-flowing financial market. The combination of a better infrastructure, increased security, and more domestic and foreign investment will allow Iraq to continue to grow and prosper. With success of the people, government, and economy, the currency of the nation will increase in value.