The reason for the adjective "Swiss" is unknown, but there are two possible explanations. The first possible explanation is that the printing plates for the currency came from Switzerland, although the notes were actually printed in the United Kingdom. After the war, subject to economic sanctions authorised by United Nations resolutions, continued importing of the "Swiss" notes was prohibited, and the Central Bank of Iraq began domestic printing of a new Iraqi dinar. The second possible explanation is that prior to the Gulf War, Iraq was historically a low inflation country, similar to Switzerland.
History
Inter-war period
After the Gulf War, the Iraqi government disendorsed the old currency, favoring newly printed Saddam dinars, and the Swiss dinar ceased to be legal tender. However, the old currency still circulated in the politically isolated Kurdish regions of Iraq. The government of the Kurdish region did not have the printing plates of the Swiss dinar, but it also refused to accept lower-quality Saddam dinar banknotes. Since the supply of Saddam dinar banknotes increased while the supply of Swiss dinar banknotes remained stagnant, the Swiss dinar appreciated against the Saddam dinar note. By having its own stable currency, the northern part of Iraq effectively evaded inflation, which ran rampant throughout the rest of the nation.
Post-war
Following the 2003 invasion the Coalition Provisional Authority, installed by the Coalition Forces, determined that Iraq needed a new, unified currency, but establishing a proper exchange rate was relatively difficult. The market exchange rate for Saddam dinars to Swiss dinars remained around 100:1 from 1998 to January 2002, but as the invasion ensued, the Kurdish currency appreciated to 300:1, and subsequently fell to 250:1. After further investigation, the Coalition Provisional Authority determined that it would be best to equate the two currencies by Purchasing Power Parity, which was around 100:1. After researching further, the Coalition decided to adopt an official rate between the market rate and the PPP rate, officially pegging the currency at 150 Saddam dinars per Swiss dinar. There were two proposed methods to unify the currencies. The first would be to print a new set of Swiss dinar notes and distribute them among the south. However, this would result in 80% of the population needing to exchange the Saddam dinar notes for Swiss dinars. Since printing more Saddam dinar notes was not politically favored, after consulting with a currency expert, the Coalition decided to alter the Swiss dinar plates to the Saddam dinar denominations. This would allow the least amount of currency exchange, but also take Saddam's image off the currency. The new Swiss currency was created in a different color to differentiate from the old currency. Reportedly, the exchange was relatively swift and without incident, with the exception of two failed attacks on currency convoys.
