Thursday, January 1, 2004
Saddam's face vanishing from Iraq currency
Reuters Baghdad, January 1
The last vestige of Saddam's Hussein rule is vanishing as Iraqi dinars bearing the picture of the toppled Iraqi dictator run out of circulation.
"We have exchanged 90 per cent of the old dinars. The new dinar has gained credibility as a store of value and is helping strengthen the exchange rate," chief central bank economist Mudhir Kasim told Reuters.
Iraq's US-led administration had to keep printing the old Saddam dinars after taking power, to cope with a shortage of low-denomination notes, even though by printing more they added to an unknown money supply and weakened the exchange rate.
The Central Bank implemented a US plan in October to destroy the old dinar and circulate new ones printed in Britain with more denominations than the 250-dinar note, which dominated the market, and older currency used in Iraqi Kurdistan and known as the Swiss dinar.
Instead of Saddam, the new dinars display symbols of Iraq's Arab civilisation, such as the 11th century physicist Ibn al-Haytham, who studied the refraction of light.
Most shops and professionals in Baghdad have stopped taking the old Saddam dinar, and currency dealers are charging extra to accept it. It will cease to be legal tender as of January 15.
"There was a political dimension to the new dinar move, but we also wanted to know the amount of money supply. We are near to having a reliable figure," Kasim said.
As the currency was changed, the Central Bank began intervening in the foreign exchange market for the first time in years, selling dollars from the country's oil revenues to strengthen the dinar.
The exchange rate rose to 1,500 to the dollar a month after the fall of Baghdad, compared to 2,000 during the final year of Saddam's rule. It weakened again to 2,200 due to concerns over the lack of stability and absence of noticeable progress on rebuilding, but has steadily recovered to 1,680 since the central bank intervention began.
The central bank has not revealed when it would stop pumping dollars into the market, but bankers say a return to the postwar high of 1,500 dinars to the dollar could be the initial target.
Strengthening the Iraqi dinar could help lessen Iraqi hostility to the U.S.-led occupation, especially among government employees receiving their income in dinars.
At the al-Qaem currency dealership on the main Sadoun street, sentiment was in favour of the new dinar.
"A lot of people have made money betting on the Iraqi dinar since the war," dealer Raed Khudeir said. "It is not normal for a country as rich in oil as Iraq to keep such a weak exchange rate."
© Hindustan Times Ltd. 2003.