Iraq: There is no difference in the dollar exchange rate between old and new currency notes
The Central Bank of Iraq issued decisive directives aimed at ending the controversy and confusion in local markets regarding dealing with US dollar denominations, stressing that there is no legal basis for discrimination in the exchange rate between old (white) and new (blue) editions.
In an official statement addressed to all licensed banks and non-bank financial institutions, the Central Bank stressed the need for full compliance with existing regulations prohibiting the rejection or devaluation of US currency based on its issue date. The bank clarified that local and international laws do not recognize any discrimination in purchasing power or exchange rate between different dollar issues, provided the banknote is genuine and meets the requirements for circulation.
Background of the crisis in local markets
This move comes at a time when Iraqi markets have witnessed, for decades, an unofficial phenomenon in which some money changers and traders impose additional fees or lower the exchange rate for older-print (pre-2013) US dollars, citing difficulties in selling them or unfounded fears of counterfeiting. These practices have led to the creation of two dollar exchange rates in the parallel market, further burdening citizens who hold savings in older currency notes.
Historically and financially, the U.S. Treasury Department and the U.S. Federal Reserve consistently affirm that all designs of federal currency remain legal tender regardless of when they were issued, and that the United States has never withdrawn any denomination from circulation due to a change in design.
Economic importance and impact of the decision
This directive is of paramount importance on both the local and economic levels, as it aims to:
- Consumer protection: Preventing the exploitation of citizens by speculators who spread rumors that old banknotes will not be accepted in order to make illegal profits.
- Market unification: Eliminating artificial price discrepancies that disrupt daily business transactions.
- Boosting confidence in the banking system: The Central Bank’s confirmation that all banknotes will be accepted through official channels enhances public confidence in depositing their money in banks instead of hoarding it at home.
Approved standards and controls
The Central Bank stated that the sole criterion for accepting or exchanging banknotes is their physical condition (free from severe damage or counterfeiting) according to international standards, not their printing year. It affirmed that it continues to receive and process these banknotes through its official channels, urging banks to facilitate procedures for citizens and refrain from imposing unjustified obstacles.
This measure is part of a package of reforms led by the Central Bank of Iraq to enhance transparency and discipline in the banking sector, and to ensure the stability of monetary policy in the country, in line with international standards adopted in foreign exchange trading.
