new iraqi dinar was exchanged at par with the old one, but old one aws worth of 3.30 US$ whereas new is worth?

Question

is worth iof just 0.006 US$, can anybody explain this (dis)parity & future expectations.

Answer 1

The old dinar did indeed have an OFFICIAL exchange rate of US$3.30. The key word here is official. It was that only because the then-Iraqi government said so. That never had anything to do with the free market rate, which was about 1200 to US$1 at the beginning of the Iraq war. In fact, in January 2002, Iraq issued a 10,000 dinar note which was readily available on eBay at the time for about US$12 (I bought mine from a seller in Jordan).
When you see those folks on eBay selling Iraq dinars and advertising that they were once US$3.30....well, they were back in the early 1980s. The free market rate was already about 300 to US$1 at the beginning of the firat Gulf war in 1991.
A current example of a big disparity between the official and free market currency exchange rates is Zimbabwe. Up until recently, the official exchange rate was 250 / US$1. At that time, the free market rate was 100,000 / US$1. Recently, they changed the official rate to 30,000 / US$1. The last free market rate quote I saw was 420,000 / US$1.
Why do countries do this? It's a way to take in desperately needed hard foreign currency for much less than it should be. In the case of Zimbabwe, it simply drives currency trading away from banks and on to the free market.

I guess the bottom line answer is that it really never was $3.30. As far as future expectations, Iraq has no stable government, no industrial base, and no hope of building either soon. What I have heard is that Iraq may remonetize in mid-2008, and one new dinar will equal 1000 current dinars. After a short redemption period, current dinar notes will become worthless.

Answer 2

not sure what your question is but... when the war started, the dinar was put on a Program Rate very low compared to before. now there is a new government and a new dinar, but there are still a few more laws that need to be signed before the rate will likely increase noticeably, the rate has been slowly increasing since November last year. the country itself is wealthy but right now the currency does not reflect that... yet