The Iraqi government formed the National Bank of Iraq in 1947, and it became the Central Bank of Iraq in 1956. Within two years of its founding, the National Bank of Iraq took responsibility for maintaining reserves and issuing notes, abolishing the former London-based currency board. During its early years, the bank maintained the London currency board's conservative strategy by keeping 100 percent reserves to support its outstanding printed currency.Continue Reading
With the name change, the Central Bank of Iraq took on additional responsibilities. In addition to issuing and managing currency, it became responsible for foreign exchange transactions and regulating the nation's banking industry. The Central Bank was also responsible for managing government loans and kept government accounts. Iraqi legislation continued to expand the bank's powers. In 1959, the bank began basing the value of the dinar on the U.S. dollar instead of the British pound. The initial exchange rate was 1 dinar to $2.80.
With the devaluation of the dollar, the exchange rate grew to 1 dinar equaling $3.38 prior to the 1990 Iraq war. After the war, the bank no longer had access to the Swiss printing operation and began printing its own money. With the ease of printing, it issued more currency than its reserves and the value of the dinar dropped so that $1 was worth 3,000 dinar in 1995.
In 2004, the Central Bank of Iraq Law established the Central Bank of Iraq as the nation's independent bank. The main location of the bank is in Baghdad, and it has four branch banks.Learn more about Banks