Shafaq News- Baghdad

Debate has resurfaced in Iraq over a long-discussed plan to remove three zeros from the dinar, with lawmakers considering whether to include a “currency redenomination law” in a package of economic measures.

The proposal has remained under study for years as the government faces liquidity pressures and difficulties financing public spending and salaries.

Supporters argue that redenominating the currency could simplify transactions and streamline cash circulation. Economists interviewed by Shafaq News, however, caution against treating the measure as a solution to underlying financial problems that cannot be resolved by changing the currency’s denomination.

The debate intensified after Communications Minister Mustafa Sanad announced on Saturday that the government had decided to remove zeros or change the currency, linking the move to stolen public funds. He estimated the value of those funds at about 8 trillion dinars ($6.1B) and suggested that a new currency could render them unusable after the transition.

The Central Bank of Iraq began studying the proposal in 2007. In 2024, former Central Bank Governor Ali Al-Alaq confirmed that the project was “still in place,” although no implementation date was set.

Economic researcher Ahmed Eid considers the timing “economically inappropriate,” given Iraq’s financial pressures, liquidity shortages and rising government obligations. Speaking to Shafaq News, he argued that the priority should be addressing the causes of the financial crisis rather than changing the currency’s nominal value.

“Removing zeros does not provide new liquidity, finance salaries, or reduce the deficit and public debt,” Eid explained, adding that the measure would neither increase citizens’ purchasing power nor raise the dinar’s real value.

Under a three-zero redenomination, 1,000 old dinars would become one new dinar. Salaries, prices, savings, debts and contracts would all be converted at the same rate, leaving people’s real wealth unchanged.

Eid also warned that introducing the reform at a time when Iraq relies heavily on cash transactions, while financial literacy and market oversight remain limited, could create additional risks. Price increases, speculation and confusion over contracts, savings and other transactions could follow if the transition were poorly managed.

His objection, he stressed, was not to removing zeros as a monetary tool, but to linking the measure to the current financial crisis. Changing the numbers on banknotes, he maintained, would not address the economy’s underlying imbalances.

Economic journalist Salam Zidan views the primary function of redenomination as reducing the number of digits and simplifying calculations. Government budgets currently expressed in trillions of dinars, for instance, would be stated in billions under a three-zero change.

A salary of 1 million dinars ($763) would become 1,000 new dinars if three zeros were removed, while a one-zero reduction would turn it into 100,000 new dinars, Zidan explained.

The measure would not, however, resolve economic distortions. Zidan pointed out that people holding illicit funds could convert their money into gold, silver, real estate, or US dollars before a currency exchange, limiting the ability of changing banknotes alone to uncover illicit wealth.

Any redenomination would also require new banknotes, updated banking systems, ATMs, electronic payment platforms, government and corporate accounts, and a transition period during which the old and new currencies could circulate simultaneously. Authorities would need to clarify the new values of prices, contracts and salaries to the public.

Financial and banking specialist Mustafa Hantoush explained that current spending is being managed under the 1/12 rule, based on the previous year’s actual expenditure. Using 2025 figures, this permits spending of up to about 152 trillion dinars ($116 billion), although reaching that level would be difficult under current revenue conditions.

Hantoush told Shafaq News that the government is seeking to contain expenditure by restricting outlays to essential priorities while relying on borrowing through the Central Bank and discounting treasury bills to cover a deficit estimated at 6 trillion dinars ($4.6B) a month.

The pressure has been compounded by a sharp decline in oil revenues linked to disruptions following the closure of the Strait of Hormuz. Iraq relies on oil for the majority of its budget revenues, leaving its public finances highly exposed to changes in oil exports and prices.

Against that backdrop, experts argue that spending reforms, revenue diversification and stronger productive and financial sectors would do more to support the dinar’s stability than changing its denomination.

Economic expert Karim Al-Hilu noted that the three zeros have come to be associated with periods of war and sanctions. The idea has been raised repeatedly over the years, including during Nouri Al-Maliki’s premiership, but has never been implemented.

Al-Hilu sees a new currency as potentially giving the dinar “new strength” while bringing some cash circulating outside the banking system back into circulation through formal channels. At the same time, he acknowledged that a significant share of funds linked to people accused of theft may already be held in gold, dollars and real estate rather than Iraqi currency.

He cautioned that requiring citizens to prove the source of their funds when exchanging old banknotes could cause widespread disruption without clear procedures. An abrupt implementation, he warned, could bring parts of the market to a standstill.

Despite those risks, Al-Hilu believes the reform could eventually become necessary and, if properly implemented, could strengthen the dinar.

The discussion also coincides with proposals to bring cash held outside banks back into the financial system. One proposal estimated the total cash supply at about 113 trillion dinars ($86.3B), including roughly 106 trillion dinars ($80.9B) outside banks, and called for efforts to return about 10 trillion dinars ($7.6B) to the banking system.

In 2024 and 2025, experts warned that removing zeros would require months of preparation, tighter banking and security controls, monitoring at borders and airports, and scrutiny of the sources of funds, stressing the need for exchange-rate and political stability before undertaking the reform. They also warned of the costs of printing new banknotes, counterfeiting, money laundering and social disruption. Calling for stronger productive sectors, they argued that the strength of a currency depends not on the number of zeros but on an economy capable of producing goods and services.