Iraq Revives Longstanding Plan to Delete Zeros from Dinar Amid Deepening Budget Squeeze

Iraq is once again reviewing a controversial and long-debated plan to remove two zeros from the dinar as the nation faces a severe budget crunch. Ahmed Rasheed, a member of the Parliamentary finance committee, stated on Monday that the proposal is currently under discussion within the Central Bank of Iraq, though it has not yet formally reached parliament.

"These are just discussions so far. They have not risen to the level of a legal proposal. No draft law has reached parliament and it has not even had a first reading," Mr Rasheed told The National. "However, the current discussions are serious. Right now there is a rationale behind this issue, and therefore they are considered serious discussions and a serious attempt."

This renewed debate revives a concept that has been discussed in Iraq for over twenty years, initially proposed during the administration of former US civil administrator Paul Bremer in 2003. The latest urgency stems from Baghdad's worsening financial situation, exacerbated by the closure of the Strait of Hormuz, which disrupted the country's primary oil export route.

With global petroleum markets remaining volatile and shipments reduced, government revenues have dropped sharply while public spending commitments stay high. Iraqi Oil Minister Basim Khudair noted that oil exports collapsed when the war began on February 28, falling from approximately 3.4 million barrels per day (bpd), though exports have since recovered to average about 2 million bpd since early August.

Consequently, oil revenues—which account for at least 90 percent of the federal budget—fell from $6.8 billion in February to roughly $2.3 billion in May and June. Meanwhile, the Ministry of Finance reports that Iraq continues to spend about $6.5 billion monthly on salaries, pensions, and social welfare.

According to Mr Rasheed, the primary goal of the redenomination is to restore the real value of the dinar and tackle a structural issue where massive amounts of currency are kept outside the banking sector. Deleting zeros will "return the value of the currency to its natural place" and bring back hoarded wealth into formal circulation. He noted that about 70 trillion Iraqi dinars are currently held outside monetary authority control out of a total 125 trillion dinars in circulation.

Minister of Communications Mustafa Sanad provided a more definitive outlook during a local TV channel interview on Saturday, stating that the government has resolved to move forward with the currency change. He linked the initiative to both the ongoing economic crisis and the national anti-corruption campaign, explaining that the process would force unrecorded cash out of hiding. Mr Sanad estimated the amount of missing, undeclared cash at 8 trillion dinars and suggested that the project could potentially be implemented by 2027, with new notes likely printed in Britain.

The Central Bank of Iraq and the government have not issued any immediate comments regarding these announcements. Currency reform has been a recurring topic across successive Iraqi administrations, initially proposed in 2011 to simplify transactions and curb inflation, though previous efforts were repeatedly shelved due to political instability, the conflict against ISIS, and fluctuating oil prices.