The new Iraqi dinar is rising against the US dollar, the old banknotes being
changed to new bills printed in England, by a consortium led by UK-based
banknote printer De La Rue. The new currency was was unveiled in Baghdad on
October 4, 2003 and introduced on October 15, and Iraqis have three months
to change all their Saddam era dinars to new ones.
The new dinar features pictures of an ancient Babylonian ruler, and a 10th
century mathematician in place of the face of Saddam Hussein. An ancient
Islamic compass, patterned on the an Astrolabe from Baghdad dated 1131 AD is
shown on the new Iraqi 250 dinar banknote. This is the same Arabic Astrolabe
that was used on the ½ dinar note of the 1980s issue and the 1000 Dinar note
of the 2002 issue. The new notes are issued in 50, 100, 250, 1000, 5000,
10,000, and 25,000 Dinar bills. Currency can be exchanged at the Rafidain
and Rasheed banks, and Iraqis have three months in which to make the
exchanges.
Paul Bremer had said on 7 July that the so-called "print" dinars in
circulation in most of Iraq, nor the formal national currency (or "Swiss"
dinar) still used in some parts of the Kurdish North were suitable for the
new Iraq, and in August, the Central Bank of Iraq had already advised Iraqis
to deposit all their Dinars in local banks to facilitate their change into
the new currency.
The new Dinar rose to 1,960 to the dollar in the currency market run by the
Central Bank recently. Nearly three million dollars were offered for sale on
Wednesday this week, and snapped up by private banks and businessmen. The
currency market is arranged to keep a lid on inflation, and prevent the
dinar from big fluctuations in value. Currency dealers and money changers
have now focused their attention on the newly created market, and they try
to offer competitive rates. It is not clear whether the Central Bank will
continue with its policy of selling dollars to the public. Previously, bank
officials said they would not interfere in fixing the exchange rate of the
new currency. Nevertheless the dinar exchanged outside the banks at a rate
of 20,004 dinars for the dollar, but dealing is sluggish.
Money has been a problem for Iraqi's lately. Billions worth of 10,000 dinar
bills were looted from banks and banks' printing storages, and a large
majority of these were without printed serial numbers. But the looters
simply stole the whole bank press and machinery. So businesspeople at Al
Kifah street (which is the Wall street of Baghdad) decided not to accept
10,000 bills, and bought them at prices ranging from 6,500 to 8,000 per
note. But merchants followed suit, and then no matter how genuine your notes
were, nobody would accept them at their real value. Most Iraqi merchants,
businessmen, and families had exchanged their smaller notes with 10k notes
before the war, and the CPA paid salaries in 10k bills. Central Bank and CPA
officials stated all the time that 10k bills were valid, and that there was
no truth in the rumours.
Thus, on 1 October it was disclosed that agents from the Defense Criminal
Investigative Service (DCIS) and the 812th Military Police Company assisted
by Iraqi police and the Ministry of Finance had broken a counterfeit
printing operation in Baghdad run by Amar Fadil Ramadan Al-Kayse and seized
counterfeit currency worth 100 billion dinars. The investigation leading to
the arrest of Al-Kayse revealed that Al-Kayse was printing and attempting to
pass counterfeit 250 Iraqi dinar notes to the Central Bank, itself funded
and operated by the CPA. Al-Kayse owned and operated a local Baghdad
printing shop and worked as editor of Nuktat Dhaw ("Spot Light"), a
newspaper in Baghdad.
As regards the 250 dinar bill, AL Kifah st. financial experts told clients
that most small 250 D bill were forged, and so they wouldn't deal with them,
except at lower prices. In present day Iraq, the grapevine works better than
official statements, people think that any official statement is just a
cover up or some sort of conspiracy to fool them. Iraqis generally don't
trust their governments, and they don't believe what governments say.
The Iraq dinar has a glorious history. The 'swisry' Dinar used during the
80's up to a couple of years following the first Gulf war was a very stable
currency and exhanged for 0.33 Dinars to the dollar, being still used in the
autonomous Kurdish territories. it comes in 0.25, 0.5, 1, 5, 10, and 25
Dinar notes. The bills were nicknamed "Swiss dinar" either because of their
relative stability and strength or because it was made in Europe, depending
on the account. The Swiss dinar was trading at about 6.7 to the dollar in
early July 2003. But now one swisry Dinar will equal 250 new Dinars, so one
Dollar would equal 7-8 Swiss Dinars, but according to another report, the
the Swiss dinar used by the Kurds will be exchanged at 150 for each new
dinar.
Then there is the tabu' Dinar (tabu' means printed) in three versions:
locally printed versions of the swisry Dinar with some minor changes (no
longer in use today), locally printed new Dinars with Saddam's picture on
all of them, in 25, 50, 100, and 250 Dinar notes (still used today in Iraq),
and locally printed smaller Dinars, also with Saddam's picture on them, in
25, 50, 100, 250, and the infamous 10,000 Dinar notes. These were initially
favoured because of the 10k bill which would allow people to store their
money in smaller amounts of notes, whereas they usually had to deal with the
problem of carrying large sacks of money in 250 D notes which would bring
unwanted attention.
By August 2002, the dinar was trading at just below 2000 to the US dollar,
and by mid-April 2003 it had slipped to anywhere between 3500 and 4000
against the dollar. In June 2003, the Iraqi central bank again began
printing Dinars, with fallen leader Saddam Hussein's image still on them.
The 250 dinar denominated banknotes were printed by the Baghdad mint, under
the supervision of the manager of the central bank, to overcome the
liquidity crisis. But newly printed notes lacked a watermark or metal line,
so many forgeries could take place for that reason alone. The aim was to get
money that had real value into people's hands without dollarisation, and the
CPA decided to distribute $20 bills to the civil servants to boost the
economy.
Brad Setser, former acting director of the US Treasury Office of
International Monetary Policy, theorised, "A currency that is tightly linked
to the dollar would ... make it harder for the government of Iraq to manage
its dependence on oil revenues. The dollar revenue from oil sales is highly
volatile, so the government would have trouble paying the same dollar salary
when oil is at $10 a barrel and when oil is at $30 a barrel. Rather than
matching expenses and revenues by paying dollar salaries that vary in line
with global oil prices, it is far easier to pay salaries in a local currency
and let the value of the local currency fluctuate against the dollar."
(compiled from various sites)
