CandyKisses: Why is Iraq not reintroducing the coin?
With the increase in inflation in local markets, talk has returned in economic circles about the reasons why Iraq did not resort to issuing coins in order to restore the value of the small currency, which has become worthless in daily transactions.
Economists believe that coins facilitate many daily banking transactions
The central bank is solely responsible for supplying the country with its paper and metal currency, while Iraq suspended its dealings with “coins” years ago, although it continued to operate after 2003.
Not long ago, the Finance Committee of the Iraqi Council of Representatives called on the Central Bank to reintroduce the “coin”, justifying that “this has given strength to the economy of countries in the Middle East.”
Jalil al-Lami, an expert in economic and financial affairs, said that the coin is one of the most important features of the economic and financial system in the world, but Iraq “lacks it today, despite the fact that its circulation was large in the last century.”
According to al-Lami, small coins facilitate many day-to-day banking transactions, as “the use of denominations and their descent into circulation will give a nominal value to the currency.”
According to Al-Lami’s interview with Ultra Iraq, most neighboring countries find that “the exchange rates of their local currency are very high against the dollar, and they basically have a coin through which to work to preserve the currency and not need to order more banknotes, especially those of small denominations.”
The reason for the neglect of coins in Iraq is due to “the high cost of minting coins, which costs more than paper currency, as well as the difficulty of carrying them for citizens,” al-Lami said.
After inflation in the economy and the words of the illiterate, it became difficult to mint coins and make them in circulation among citizens, so “the step of deleting zeros is supposed to precede the process of minting coins so that there is value for small denominations versus large ones and then resorting to minting coins.”
Iraq witnessed the issuance of the first new currency in 1931, which was bronze coins.
But there are those who believe that the non-use of this currency is due to a technical or procedural reason and is not related in any way to inflation, according to economist, Hussein Jaber, who explains that “if the denomination of one thousand dinars is used paper or metal, if any, this does not cause any change in the general level of prices, because it is a means of exchange and transfer of value between the seller and the consumer.”
The price inflation that most people feel is in the inflation of the number and not the value, because according to Jaber the Iraqi dinar is still legally “worth 1000,1000 fils, and because of the excessive issuance of money it has become equal to <>,<> dinars, which is in fact one dinar,” stressing “so there is no effect of using the coin.”
Jaber told Ultra Iraq that “coins are used for small denominations of currency as small parts that give greater flexibility in dealing and achieve a degree of justice for the benefit of consumers, while large coins are not compensated with coins for technical considerations.”
But Jaber acknowledges that the coin has advantages that are reflected in the incomes of consumers and low-income earners such as employees, retirees and others.
He explains that “coins are small denominations and form parts of a large currency, they can cover the differences in prices flexibly without loss to the consumer or seller and limit the exceptional profits achieved by sellers by selling their cheap goods at higher prices that correspond to the available currency denominations, for example: the price of a small bottle of water is 135 dinars in bulk Its price with profit is 175 dinars, but the selling price to the consumer will be 250 dinars, as there is no denomination smaller than 250 dinars to return For the consumer, he can accept this price for one bottle or buy three bottles for 500 dinars even if he does not need them.”
Regarding the high prices of their production, Jaber added that “the cost of making them is lower than the cost of paper, and they are not quickly damaged by paper currencies that are perishable, burned, torn and so on.”
Economists saw that the elimination of inflation in Iraq is in the automation of currencies digitally
As for the negatives of the coin, they are almost “non-existent as they cannot be used for commercial transactions and are limited to individual transactions,” according to economist Hussein Jaber.
Shortly after the U.S. invasion of Iraq, the Central Bank of Iraq announced the first circulation of 25, 50 and 100 dinar coins after they had been abolished by Saddam Hussein’s regime after the 1991 Gulf War.
But persistent inflation in local markets, with its internal and external causes, has devoured small Iraqi currencies and they have no material value, according to economist Nabil al-Tamimi.
Al-Tamimi told Ultra Iraq that “issuing coins costs the treasury of the Central Bank a lot of money,” considering that “the best solution to eliminate economic inflation in Iraq is to automate currencies digitally.”
“Digitizing currency trading will restore the value of small currencies, especially since most of the world’s economically developed countries no longer rely on cash transactions,” he said.