To "invest" in Iraqi dinars, it's the same as investing in any other Currency. You purchase a certain amount of dinars and pay with the equivalent amount of U.S. dollars. Like buying stocks or investing in bonds, you expect the price to rise and sell at a profit.
Investing in foreign currency always has its risks; however, it pays off for those who do their research.
It's not enough to know you can invest in Iraqi dinars. Whether or not you should? That’s the pressing question. Although it might be useful for those living near Iraq, investing in this currency comes with plenty of risks.
Here's what you need to keep in mind: The Iraqi dinar is Iraq's official form of money and can be exchanged for U.S. dollars. Many investors are hopeful that the country's economy will recover from its civil and regional wars, which has led some to speculate that the dinar's value will increase against the dollar.
Major banks and brokers do not handle transactions of the IQD/USD pair, so investors must use money exchanges, which charge steep fees. The Iraqi dinar's value is controlled by Iraq's government.
The currency faces many issues and the future is unsure.
Knowledge about the Iraqi Dinar
Because of UN sanctions and corruption during Saddam Hussein’s reign, Iraq’s economy suffered following the 1991 Gulf War. This lead to the dinar’s decrease in value from $3 pre-war to a fraction of a penny in 1993.1 By 1994, inflation soared to over 448%.2
In 2003 when the US-led coalition took control of Iraq, they kept using old dinars until an interim government released new ones that were printed in the UK and exchanged with their pre-war equivalents at equal worth.
As Iraq's economy was improving, many investors started to buy up lots of Iraqi dinars, thinking that the currency would keep going up. They used what happened to the Kuwaiti dinar after the Gulf War as an example. Around the same time, some US authorities cautioned people about scammers who were selling "investments" in dinar for inflated prices and other fees.
In late 2020, Iraq devalued its currency by more than 20%, which caused widespread public demonstrations in a country already hit hard by COVID-19.
The Iraqi dinar is not available on the foreign exchange market. Therefore, the only way to purchase this currency is through an exchange service with high charges or buying it from the illegal market.
Reasons to Invest in Iraq’s Financial Future
Iraq has a thriving oil industry and exports the second or third largest amount of crude oil in the world. With access to over 110 billion barrels of petroleum and an equity stake in the Al-Ahdab Oil Field, Iraq has 11.7% of the world’s oil reserves. This large source of natural wealth will eventually be tapped and has the potential to transform Iraq into a regional economic powerhouse with massive GDP growth. That will require a peaceful, stable business atmosphere to establish investor confidence and revive its economy.
Buying Iraqi dinars is not necessarily the best way to bet on the country’s economy. For one thing, there are only a few authorized dealers. You can buy them only at specific money exchangers who may or may not be licensed and may even have been involved in scams and frauds. Several U.S. state regulators issued warnings as early as 2011 concerning currency “brokers” promising high returns while taking hefty commissions for hard-to-sell dinars. Moreover, legitimate trading volume is extremely low. The IQD is not traded on an open market like global forex markets, and only a handful of Middle Eastern banks are willing to trade in it. Even if you can find a dealer, rates that change daily make the transaction complicated--and expensive. And unlike many other emerging-market currencies, the exchange rate isn’t floating freely; it's fixed by the central bank. Thus, the currency is unlikely to experience any rapid swings in value.
The Financial Verdict
Until Iraq is more stable, there is considerable doubt that its currency will appreciate in value. Therefore, it may not be a wise investment for those who do not live in the Middle East, as there are few ways to trade Iraqi dinar and reap any interest from it. Unless you are trading on regulated markets or through an approved agent, it is risky to invest in the Iraqi dinar or similar currencies due to their unpredictable exchange rates.
The Investment Verdict
If you decide to purchase a limited amount of the IQD and hold the currency until such time, that the value increases against the U.S. dollar, this may be a better option for those who enjoy taking a gamble. However, the same limitations are subject even for buy and hold investors. Until the currency is traded on the open market, it may be difficult to profit from the currency, but not
