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Last Updated:  Friday, 4 April, 2003, 07:57 GMT 08:57 UK
Saddam's currency under threat
Saddam dinar
Saddam has a price on his head
As the US prepares to install its administration in post-war Iraq, one of their main concerns is what to do about Iraq's volatile currencies, particularly the one bearing the face of Saddam Hussein.

Despite their uncertain future, trade in the Iraqi dinars has been brisk for money changers as the fortunes of war ebb and flow.

There are two types in circulation.

One is known as the "Saddam" dinar and its predecessor, which is used in Iraq's autonomous Kurdish region, is called the "Swiss" dinar.

"Most people are asking for the Swiss," a money changer from the Al Alami exchange in Amman, Jordan, told BBC News Online.

He added that demand for the Saddam was weak but that trade in both currencies was so erratic that they had to ring other money changers hourly to work out a market price.

Currency change

Earlier this month a US official said a new currency was needed to introduce some stability and that it was unlikely the Saddam dinar would survive.

Swiss dinar
Kurds prefer the old Swiss dinar
"There is no question that the international community will assist the Iraqi interim authority in implementing its currency decision whatever it happens to be, perhaps a new currency, perhaps the old Iraqi currency, the Swiss dinar," he said.

A retired US general and president of US defence contractor SY Coleman, Jay Garner, is leading the US-led reconstruction plans and will be influential in deciding the dinar's future.

A more controversial solution reportedly being touted is to replace the dinars with the US dollars, which could upset Iraqis and neighbouring countries.

Volatile trade

Even before the war, the dinars were unstable because of the collapse of Iraq's banking system and runaway inflation.

The dinar was once worth $3 in 1990 - which is still the Iraqi Central Bank rate - but since hostilities began it has fluctuated between 1,500 and 3,000 to the dollar on the black market.

The Saddam was introduced after the last Gulf war to replace the old currency, which was no longer recognised outside the Kurdish regions.

The Swiss, so-called because it was printed in Switzerland, has gained in value recent months from 10 dinars to the dollar to as high as 6.5 dinars.

Market value

Meanwhile, the US-based online auction site eBay has bids for the recently introduced mint 10,000 Saddam dinars of $51, while a 5 dinar note is fetching 70 cents.

"The value of Iraqi dinar pre-1990 was 1 dinar = $3, imagine if you buy these notes for few dollars and the dinar restores its old value," the seller says.

The belief that the dinars' value will be restored is the reason given by Jordanian money changers to why people are buying the old currency.

"It's been very busy," said a money changer at the Abu Exchange Company in Amman.

But Kurdish officials have said the Swiss' surge is based on absurd speculation.




SEE ALSO:
Tough rebuilding ahead in Iraq
03 Apr 03  |  Business
Iraq issues 10,000 dinar banknote
06 Aug 02  |  Business



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