Zimbabwe Revalued Its Currency Exchange in 21 Days - Will Iraq Do the Same?

What did the central bank and government do?

(You can scroll to the bottom of the article for the immediate answer.)  The central bank — Reserve Bank of Zimbabwe (RBZ) — and the Zimbabwean government took several major actions:

1. Introduced a new currency

   • In April 2024, Zimbabwe introduced the ZiG (Zimbabwe Gold) as its new currency, replacing the previous Zimbabwean dollar (ZWL) system. (World Economic Forum)

   • The new currency is said to be backed by a “basket” of assets: foreign currency reserves, gold and other precious metals. (World Economic Forum)

   • The official launch exchange rate was ~13.56 ZiG per US $1. (World Economic Forum)

2. Conversion of previous currency balances

   • All bank accounts, obligations, and balances in the former Zimbabwean dollar (ZWL) were to be converted into ZiG. (Wikipedia)

   • The official conversion rate for existing ZWL to ZiG was announced: 2,498.7242 ZWL per 1 ZiG. (Wikipedia)

3. Time-frame / mandate for conversion

   • Zimbabweans were given 21 days (three weeks) to convert their ZWL cash/notes to ZiG. (NewZimbabwe.com)

   • Banking/payment-system platforms were to be updated; by some reports certain sectors had conversion deadlines (for example, by 12 April 2024) to complete the switch. (Xinhua News)

4. Legal/administrative enforcement

   • The RBZ and government mandated banks and other financial institutions to implement the conversion and adopt the new currency. (Reserve Bank of Zimbabwe)

   • There were also compliance pressures: retailers, businesses were expected to price and transact in the new currency, and informal street currency dealing (black-market) was subject to enforcement actions. (Al Jazeera)

5. Currency backing and policy adjustments

• The switch to the ZiG came amid years of hyper- and high inflation in Zimbabwe, and the government’s attempt to “re-anchor price and exchange‐rate stability”. (World Economic Forum)

• Later in September 2024 the RBZ devalued the ZiG by about 43% (i.e., the official rate moved from ~13½ to ~24½ ZiG per US$) because the gap between official and black-market rates was widening. (Reuters)

What did people (citizens/households/businesses) have to do?

From the perspective of the general public and businesses:

• You had to convert your old Zimbabwean dollar (ZWL) notes or account balances into the new ZiG within the given timeframe (21 days).

• Banks and other financial institutions were required to update systems so all balances, obligations, and transactions would be denominated in ZiG.

• Businesses & retailers had to price goods, transact, accept the new currency in their dealings (under the rules). Some vendors reportedly rejected the old notes before the new ones were widely available — causing some disruption. (Al Jazeera)

• People had to adjust to the new exchange rate benchmark and currency unit in daily life (pricing, wages, savings, etc.).

• Because the new currency was (theoretically) backed by gold and foreign assets, confidence and trust became very important — and many ordinary people remained skeptical. (ISS Africa)

What was the timeframe for exchanging the old currency?

• The announcement indicated 21 days for conversion from ZWL to ZiG. (NewZimbabwe.com)

• Reports show that the conversion process for different economic sectors was scheduled to continue until about 12 April 2024 for full banking/payment-system readiness. (Xinhua News)

• After that window, the emphasis was on the new currency being the legal currency in circulation and the old notes being phased out.

Why was currency exchange (or convertibility/exchangeability) not available (or limited) outside Zimbabwe?

There are several reasons why external convertibility/exchangeability is constrained:

1. Limited foreign reserves / credibility issues

   • The new currency is backed by assets (gold, reserves), but the extent of those reserves and the transparency around them have been questioned. (ISS Africa)

   • If the currency cannot be confidently exchanged internationally, foreign exchange markets may not freely deal in it.

2. Sanctions / international financial isolation

   • Zimbabwe has had a history of external debt defaults and limited access to global capital markets. That limits foreign banks/markets’ willingness to deal in its currency. (Le Monde.fr)

   • For outside foreign exchange dealers, handling a currency from a country under economic stress involves higher risk (regulatory, liquidity, counterparty) and they may avoid it.

3. Capital controls / legal restrictions

   • The central bank or government may impose restrictions on cross-border flows, exchange of the new currency, or convertibility to foreign currencies. For example, a report states that converting ZiG to foreign currency requires RBZ approval and is “near impossible” for locals. (Al Jazeera)

   • When a currency is local and new, foreign exchange markets may not have established liquidity; banks abroad may not list or support it yet.

4. Market acceptance & liquidity

   • Even if officially convertible, if there is very little external demand, or few market makers abroad, the currency will not trade much.

   • The black-market in Zimbabwe showed a much worse rate for ZiG compared to the official rate, which signals weak external confidence. (Voice of America)

In short: the combination of limited external credibility, regulatory/institutional hurdles, and weak liquidity/external demand means that even though the currency is “official”, it is not easily exchangeable outside Zimbabwe in a normal international foreign‐exchange setting.

Will Iraq do the same thing?

This is more speculative, but here are points to consider:

• Does Iraq have the same level of currency‐collapse/hyperinflation/dollarization issues that Zimbabwe has? Not really at the same scale.

• Changing a national currency (or re-denominating/replacing it) is a drastic step and is usually done when the existing currency has very low public confidence, extreme inflation, or external imbalances.

• For Iraq to “do the same”, the conditions would have to be similar: large loss of trust in the currency, need to re-anchor the value, inability to maintain stability under the current unit, etc.

• Iraq’s situation: the Iraqi dinar (IQD) is pegged (or roughly managed) to the US dollar historically, and while Iraq has economic problems (oil dependence, corruption, inflation), it has not shown the type of hyperinflation or repeated redenomination Zimbabwe went through.

• Also, it would be very complicated for Iraq to introduce a “gold-backed” new currency and expect external convertibility; it would require large reserves, institutional confidence, external access, etc.

• Unless there is evidence of the Iraqi central bank or government announcing a planned replacement of the dinar with a new currency or redenomination, one cannot assume they will do exactly the same.

My conclusion: It is unlikely (though not impossible) that Iraq will replicate the Zimbabwe model exactly, unless their economic/monetary conditions deteriorate significantly and they see replacement as the only viable path. But as of now, I’m not aware of credible signals that Iraq is preparing such a currency switch.

• Financial Times
• apnews.com
• apnews.com