As US-led coalition troops draw closer to Baghdad, the capital’s five million inhabitants are faced with the difficult choice of either rushing to exchange their Iraqi dinars for US dollars, or hanging on to the local currency, in hopes of better times ahead for the battered dinar. For the mean time, the Iraqi dinar, much like Saddam Hussein, seems to be standing its ground.
Currently, there are two kinds of Iraqi dinar. The ‘old dinar’, also known as the ‘Swiss dinar’, is the currency that was printed prior to Saddam Hussein’s accession to power in 1979, and was named Swiss as a sign of its quality print. The old dinars feature Iraqi antiquities and a statue of King Faisal I.
The currency was withdrawn from circulation in 1993, partly because printing in Britain was no longer possible under UN sanctions. It is an illegal tender in areas under Iraqi government control, yet the tattered currency notes are still freely used in the Kurdish-controlled northern regions.
The current regime began printing its own dinars in 1991. The ‘Saddam dinar’, carrying the president’s image, was printed in large quantities and in poor quality, particularly in the months ahead of the long-expected war. The most common unit remains the 250-dinar bill, although in late 2002 Iraq’s central bank issued a new 10,000-dinar banknote for commercial transactions. Credit cards and cheques are unacceptable in Iraq.
As the capital braced for war that may yet develop into a prolonged siege, the initial response for many was to withdraw dinar bank deposits and rush to stack dollars, gold and essential commodities. Fears ran high that the Iraqi dinar would become worthless if President Saddam Hussein’s regime was toppled.
Shortly before the start of the war, the Iraqi dinar plunged, hitting a seven-year low of 3,300 to the US dollar, against around 2,200 just one week before. However, a surprise rebound emerged by March 26, nearly a week to the launch of the coalition’s military campaign. The dinar appeared to recover and was trading at 2,850.
The rebound was attributed by several of Iraq’s state-licensed exchange bureau owners to a gush of patriotic sentiment in Baghdad, with the realization that a US-British takeover of Iraq may not so easily come to happen. Another possible explanation could be found with Kurdish dealers who are thought to have sent up the dinar's value by buying large quantities and looking to sell them to the thousands of US soldiers expected to land in northern Iraq.
A more market-oriented explanation for renewed demand seems to be recent speculations that a post-Saddam government would either change all notes bearing Saddam Hussein's image before switching to new bills or reinstate the former currency. These expectations have been fed by reports that US and Britain, believing Iraqis would reject the greenbacks as their currency, have already begun printing new Iraqi money.
Such rumors have convinced many Iraqis to stick to their dinars. At the same time, a rush to swap dollars into old dinars has been reported by moneychangers in Baghdad, in the Kurd-controlled regions and in countries neighboring Iraq, particularly Jordan and Kuwait. As a result, old Iraqi bills and notes have regained their ground against the US dollar. Since the outbreak of war in Iraq, on March 20, 2003, the exchange rate rose from $10 to $36 for 1,000 old Iraqi dinars. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
