Iraq Economic News and Points To Ponder Tuesday Afternoon 8-25-26

Iraq Considers Currency Change and Dinar Redenomination as Parliament Seeks to Delay Draft Law

 25-08-2026    Peregraf — Iraq is considering a major currency reform that would involve replacing existing banknotes and potentially removing zeros from the Iraqi dinar, but the Parliamentary Finance Committee has asked the government to postpone legislation on the proposal until its economic, legal and financial implications are studied in greater detail.

The Finance Committee hosted the Governor of the Central Bank of Iraq on August 23 to discuss the proposed currency change and the removal of zeros. Following the meeting, the committee sent a formal letter to Prime Minister Ali Faleh Al-Zaidi's office recommending that a vote on the draft law be postponed pending direct discussions between Parliament, the Council of Ministers, the Central Bank, the Ministry of Finance and the Ministry of Planning.

The committee distinguished between replacing the existing banknotes and actually removing zeros from the dinar's denominations. According to its letter, changing the currency without deleting zeros falls within the Central Bank's legal authority under Article 36 of the Central Bank Law No. 56 of 2004.

However, removing zeros would require legislation because it would affect a wide range of existing legal and financial obligations. The committee said the process would require amendments to civil, commercial and criminal legislation containing amounts denominated in dinars, as well as contracts involving investment projects, debts, government fees, fines and other financial obligations.

The committee also said the legislation would need to protect the rights and obligations of creditors and debtors, establish a clear timetable and mechanisms for the transition, and address possible amendments to Iraq's Anti-Money Laundering and Counter-Terrorism Financing Law and the Integrity Commission Law.

$250 Million Printing Plan

MP Dilan Ghafour, a member of the Finance Committee, told Peregraf that removing zeros would require the printing of new currency at an estimated cost of $250 million.

Ghafour said four countries — Germany, France, Australia and the United Kingdom — had been selected for the printing process. She said Iraq's current money supply stands at 113 trillion dinars, and estimated that between 8 trillion and 10 trillion dinars had been lost during wars or stolen. She said only about 6% of the remaining currency is held by the government, while the vast majority is in public circulation.

Ghafour said the proposed exchange would provide an opportunity to bring more cash into the formal financial system. She said people holding large amounts of cash could be required to explain the source of their wealth when exchanging old notes.

She also said the Finance Committee had raised concerns over the possibility that rising real estate and gold prices could provide safe havens for illicit funds or facilitate money laundering. According to Ghafour, relevant oversight bodies and the Ministry of Planning would be responsible for monitoring those developments.

MP Ahmed Haji Rashid, another Finance Committee member, said the government is preparing to change the currency and that the samples, designs and dimensions of the new notes are ready.

Rashid said the proposed plan involves printing 7.5 billion banknotes across all denominations, also at an estimated cost of $250 million, with Germany, France, Australia and Britain designated for the printing process.

He stressed that the proposed currency would retain the same price and value, meaning the planned change would not in itself constitute a devaluation or increase in the dinar's real value.

Rashid said the reform is intended to withdraw large amounts of cash currently outside the banking system, combat the circulation of cash linked to corruption, strengthen protection against counterfeiting and encourage citizens to move savings from homes into banks.

He said the current banknotes have been in circulation since 2005, and argued that replacing them would address security concerns and reduce counterfeiting risks.

Rashid also said the reform could help activate what he described as "idle capital" held outside the banking system because of limited public confidence in banks. Under the proposed process, exchanging old notes through banks could encourage greater deposits and increase the use of formal financial services.

He estimated that the overall currency replacement process could take three to seven years.

Finance Committee Calls for Caution
Despite the preparations described by the MPs, the Finance Committee has not endorsed immediate passage of the legislation.

In its August 24 letter, signed by Finance Committee Chairman Uday Awad Kadhim, the committee formally recommended postponing the vote until the government and relevant institutions conduct a comprehensive assessment of the proposed currency change and removal of zeros.

The committee said the process could have implications extending beyond monetary policy, including contracts, taxation, debts, criminal penalties, anti-corruption measures and the rights of citizens and businesses.

The proposed reform therefore remains subject to further government and parliamentary review, with the Finance Committee seeking a coordinated assessment before legislation on removing zeros from the Iraqi dinar proceeds.  https://peregraf.com/en/report/12333