The idea of investing in the Iraqi Dinar has become an interesting fact for many investors for years. A big attraction has been the massive ROI due to the popular belief that once the insurgency subsides and Iraq stabilizes, the RV will soar. But when one looks closer at what it takes to invest in the Iraqi Dinar, the truth may not necessarily be as popular a story. The intention of this article is to turn the light on the myth about Iraqi Dinar investments and explain to you everything you need to know to understand the benefits and the threats of investing in it.
While some shall proclaim that the Dinar opens the way to making huge profits, others are debating that the sort of investments they speak of is too risky. Consequently, is it a fact or an invention of fiction? Let’s explore.
The existence of the Iraqi Dinar began in 1932 with the formation of the Kingdom of Iraq. : First linked to the British Pound, it was used in different ways for several decades. During the period of Saddam Hussein in 1980 and 1990, as well as in the period beyond the Gulf War 1990-91 and the Iraq War in 2003, the Dinar registered a monumental fall. After that, Iraq suffered from periods of economic slump, skyrocketing inflation, and political unrest, and all of these factors affected the performance of the Dinar.
Dinars has always been closely associated with the oil sector, as Iraq is one of the world’s biggest oil producers. The fact that the country’s economy heavily depends on the revenue earned through the exportation of oil is the primary reason that the value of its currency relative to other currencies used in the global economy can be easily set. Nevertheless, the Dinar, which has been in circulation for a long time now, still has a low purchasing power compared with other world currencies, largely due to the instability of the political and economic system in Iraq.
The Iraqi Dinar is not solely a currency; it occupies an important category in terms of the functioning of the economy of Iraq. Since Iraq has tremendously relied on oil revenues, the Dinar tends to vary with the change in global oil prices. In the same sense, when oil prices are high, the Dinar simply appreciates slightly as Iraq earns more foreign exchanges. On the other hand, whenever there is a dip in the oil prices, it is all lost for the Dinar, which goes a long way in revealing the fact that the country’s fiscal policy, if there is one, is highly erratic with the overall economy.
Nonetheless, it is imperative to note that the political situation in Iraq also plays the most crucial role in determining the value of the Dinar because exports of oil also form the most crucial portion of this country’s revenues. Civil unrest, navigating through political leaders’ power struggles with other nations and within the country, leads to a fluctuating investment atmosphere in a foreign country, as well as exchange rates. It is also sensitive to these external factors, which leads to increased risk; hence, many people avoid investing in the Iraqi currency.
To encourage investors, particularly those engaging in oil-for-food, Iraq has been floated on the debacle of an RV – revaluation that is certain to happen in Iraq. The reasoning is that as soon as the Iraqi government becomes more stable, you can sell your Dinar for much more than you bought it for. Equity markets have compared this to other emerging market currencies, where a particular economy has a rally that triggers a hike in the value of the issued currency.
But even so, this promise of high returns stays within the sphere of anticipation and, more often than not, unfounded. While some people have cashed in on investing in Dinars at the right time, many more lose their money, unlike those who have made large gains. Iraq has not explained any probable time for revaluation, and there are no practical measures on the process that can enable such a huge alteration in the currency. Consequently, we need to dismiss the high-return slogans that are standard in the Dinar investment circles as a mere myth.
The Iraqi Dinar is considered a very high-risk investment. The currency market is very sensitive and unpredictable; the Iraqi Dinar does not remain an exception to this. Unlike more developed currencies such as the US Dollar or the Euro, the Dinar suffers sudden and sometimes unpredictable fluctuation in its value. People buy the Dinar in the belief that the country is improving its economy with the view to making the money more valuable. However, the exact time when such an appreciation may occur has not been well defined.
Also, the Dinar is not well known in foreign circulation, which makes it non standard and difficult to change. Due to this, an investor may feel helpless in coping with other investors for the Dinar at preferred rates, most so when the market sentiment turns sour.
The result of the above analysis means that Iraq is in an insecure economic state with a mixture of political and economical uncertainties. The Iraqi economy remains reeling from the prospect of such a large portion of the economy being managed with a somewhat delicate organizational overlay. Surprisingly, Iraq has one of the largest known oil reserves in the world, but depending on oil revenues has turned out to be a blessing in-disguise.
These saw the economy heavily reliant on oil export and this makes the country’s economy very sensitive to change in prices on global markets. Further, the political instability and war in Iraq have caught many challenges in the redevelopment of the infrastructure. There has been minor economic growth noted and a high unemployment rate especially among the youths.
However, there are some factors that really have a lot to do with the worth of this Iraqi currency known as the Iraqi Dinar. These include:
There are many risks associated with buying the Iraqi Dinar, including fluctuations in foreign exchange. The fluctuation of the value of the Dinar is also dramatic and fluctuating since Iraq’s political and economic situation is unstable. This makes it practically impossible for investors to time when they are likely to get their profits or when they are likely to face their losses. People who use their money to invest in the Dinar are simply using what experts consider ‘the shot in the dark saying that the country will survive and that the currency will rise.’ Such volatility can be quite nervy for any investor who is in search of consistent returns.
Fluctuation in the political situation, particularly in the long run, affects the value of the Dinar comprehensively. Iraq has been facing political instability as well as social unrest for a number of years and the current political climate of the country remains volatile. The political authorities’ corruption, sectarianism and power struggle among political elites sustain the conflict which does not let Iraq make radical changes or attract foreign investments.
A high level of political instability forces international investors to avoid using the Dinar and as such the value of the currency low. Such a condition is topped up by the government’s failure to guarantee political stability and security to boost the business environment.
It also offers the legal and regulatory risks when participating in the Iraqi Dinar investment. In the government’s instance, the Central Bank also controls the circulation of dinars, primarily in the matter of overseas swapping. However, there are legal provisions in some countries allowing the purchase and sale of the Iraqi Dinar, and such laws make it a very sensitive and prohibited investment for the global investors.
Many financial specialists are very careful with their advice concerning the investment in the Iraqi Dinar. Critics, however, argue that there is much speculation in the process, the relative instability in the Iraqi economy and basically the inability to chart a course towards a revaluation of the currency. As for such risks, most professional financial consultants advise to turn attention to more reliable and constant investment options including the shares, bonds or even the more reliable foreign currencies.
While there have been many alerts from Global economists discouraging investments in Dinar. They do accept that Iraq has an ample amount of oil and has the possibility to get on its feet; however, they stress that the central to the value of the Dinar is the political and/or economic instability in Iraq. Some of the economic references also explain that most of the facts provided by the people selling Dinar investments tend to be misleading and full of speculation.
There are several myths that have made people believe that investing in Dinar will be very profitable. In my view, one of the most pervasive myths is that people believe that Iraq is practically on the edge of making a monumental revaluation of the Dinar. Most of the Dinar investment promoters have relied on this myth suggesting that the currency will revaluate shortly, and investors will make very large gains that they have promised.
The other myth is that the Dinar is a ‘locked- in’ investment because the Iraqi economy must rebound and its currency will surely rise in value. There is no evidence presented for these allegations, and shamelessly, these persons portray their manipulations as an investment opportunity.
Sadly, due to such promises of good returns, there have been many scams involving the Iraqi Dinar. A lot of times con artists posing as dealers will resell dinars at a higher value promising that the dinars are going to erupt soon. People are advised to invest in Dinars and wait for about three to five years then they do a swap and take their money back.
It is thus very important to do your homework and not be pressured into investing based on rousing speeches or high-pressure sales pitches. Investment opportunities that state that they are riskless or are about to go up are the most dangerous and should be avoided at all costs.
In fact, the opportunity to make a fortune from Iraqi Dinar investments simply does not exist in the real world. However, there are very few people who have made lots of money out of their investments. To most people the Dinar has not made them wealthy, though mostly because they have not invested enough to turn the tide. If Iraq does manage to stabilize in the future then it does not mean that the Dinar is going to take a spectacular rise.
Due to the unpredictable political and economic circumstances of Iraq, it is improbable that a large amount of money can be earned from investing in the Dinar. Anything can happen in currency devaluation, inflation, and political instability, while the chance and potential for profit are almost negligible in most cases. This makes it possible to say that Dinar’s investment is very speculative. Therefore, one must be very cautious before investing in this opportunity.
It is our hope that the information provided in this eBook will serve as a distinct guide to assist people in considering better options than calculating when to invest in Iraqi Dinar.
There are other less risky investment opportunities in which individuals who want fixed returns can invest. Some of the known investment opportunities include stocks, bonds, real estate, and other foreign currency from well-developed economies. Although these investments do not represent such attractive opportunities to get fabulous wealth as the Dinar does, they are unlikely to lead to serious financial losses.
The most basic form that risk mitigation can take pertains to diversification which is more effective than all the other strategies that are in the market. In this way, investments will be diversified across a set of different classes and markets, and thus they will not require a single investment. This also assists in reducing the effects that result from a bad investment in any specific risky venture like the Iraqi Dinar.
Finally, investing in the Iraqi Dinar is a very high-risk and high-reward proposition. The possibility of a great return seems to be very attractive; however, the associated factors, such as political risks, incidences of inflation, and instabilities in currencies, should make the option very unattractive to most investors. In this case, it is advisable to have a determined stock and avoid putting all your capital in it, such as the Dinar, thereby encouraging one to start exploring other stable investments. Winning the riches is not an overnight affair or a stroll in the park; the same fate might not be made for the Dinar either.
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