New dinar shores up weak exchange rate - and sheds image of Saddam

Published on 02/01/2004 00:00

THE last vestige of Saddam Hussein’s rule is vanishing, as Iraqi dinars bearing the face of the toppled Iraqi dictator come 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," a chief Central Bank economist, Mudhir Kasim, said yesterday.

The bank implemented a United States 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 an older currency used in Iraqi Kurdistan 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 on 15 January.

Iraq’s US-led administration kept 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.

"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," Mr 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.

Strengthening the dinar could help lessen Iraqi hostility to the US-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," said a dealer, Raed Khudeir. "It is not normal for a country as rich in oil as Iraq to keep a weak exchange rate."