Is the Time Right for American Banks to Convert Iraqi Dinars?

 

The climate in Iraq has definitely been stabilizing: less violence, more businesses being formed, reconstruction work under way, and the banking and economic systems are being constantly improved. Even with all of the progress that’s been made to date, American banks have still not fully embraced the Iraqi dinar. At this point, in order to convert Iraqi dinars to American dollars, you must deal with a bank which operates in Iraq, or the Central Bank of Iraq.

The new system of banking in Iraq has seemingly been modeled after the Federal Reserve Bank in the United States. It has responsibility for managing the currency, holding foreign exchange reserves, moderating interest rates and, therefore, inflation, and stabilizing currency prices. With this type of system in place and improvements that have been made, many more banks will be interested in opening in Iraq.

Many of those involved with the dinar believe that when large international banks are confident enough to deal in Iraqi dinars, it will cause a surge in pricing. Since 2004, eleven foreign banks have been licensed by the Central Bank of Iraq to do business in the country. However, due to the still volatile conditions there, at least by western standards, these banks have largely partnered with existing Iraqi banks rather than opened full-fledged branches of their own. This lack of presence of the foreign banks is seen as hindering the improvement in the dinar’s value that many people seek. Three global banks, National Bank of Kuwait, HSBC Bank, and Charter Bank of England are being especially closely watched as it comes to their involvements in the Iraqi banking environment.

Traders feel that once these banks with such a huge global presence become entrenched in Iraq, it should cause the dinar to become available everywhere on the international market. People should be able to easily trade dinar for their local currency; as easily as they do any other foreign currency at their local bank or currency exchange.

Until this happens, if you have dinars you want to exchange, you will have to deal directly with local Iraqi banks. You can find a lot more information about banks and banking in Iraq by visiting the website for the Central Bank of Iraq. There is also a list of all the banks that do business in Iraq on the site.

The New York Federal Reserve Bank currently holds billions of dollars in Iraqi money. This money is earning millions in interest annually. These deposits in U.S. currency were made as part of the plan for stabilization of the monetary system in Iraq, and also to drive up the value of the Iraqi dinar. Limiting U.S. currency in the country is seen as key to stabilizing the banking and monetary system’s and increasing the trust of the people in the local money.

American banks should begin converting Iraqi dinars in the near future, as the continued stabilization of the monetary systems are put in place, economic growth is felt, and violence is kept in check in the country.