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US Administrator Announces New Currency for Iraq - 2003-07-07

The civilian administrator of Iraq, Paul Bremer, has announced that the country will be getting new banknotes. Mr. Bremer has also approved a new budget with heavy emphasis on improving security and infrastructure.

Ambassador Bremer has signed a $6.5 billion budget for the rest of 2003. He says a little more than half the money is expected to come from Iraqi oil revenues, and most of the rest will come from the United States.

The largest single item highlighted in his budget announcement is improvements to the electricity system worth more than $300 million, followed by security and justice projects worth about $250 million.

But the news that is likely to register most with the Iraqi people is the announcement of the new Iraqi currency.

According to senior coalition officials, the new banknotes will actually look familiar to many Iraqis. They are a revival of the so-called Swiss dinar, the currency used in Iraq before 1991 and still in circulation in the Kurdish-controlled north of the country.

Mr. Bremer says the coalition has not designed a new currency for Iraq because only a sovereign Iraqi government can do that. So they will be printing a new version of the Swiss dinar, with a few unspecified modifications to make them harder to counterfeit.

The Swiss dinar notes do not have Saddam Hussein's picture on them, unlike the dinars currently in circulation. And they will come in a variety of denominations, from a 50-dinar note all the way up to 25,000-dinars.

The currency being used now only comes in two denominations, 250 dinars and 10,000 dinars, and the Iraqi people have largely refused to use the 10,000-dinar note. So the 250-dinar note is the mainstay of Iraq's economy.

It is worth about 20 U.S. cents at the current exchange rate. That means Iraqis have to carry large wads of cash in order to do even the simplest transactions.

Senior coalition officials say they hope the new currency will help re-invigorate the Iraqi economy by making it easier for people to spend money.

The new banknotes will not be issued until October 15, and Iraqis will be able to swap their old notes for the new ones for several months after that. The exchange rate will be one-to-one.

The exception is in the Kurdish north, where the tattered old Swiss dinars are in use. Those notes will have a different exchange rate, because they are currently valued differently than the main Iraqi currency.

After the switch, Mr. Bremer says the whole country will be using the same currency for the first time in years.

Senior coalition officials say it looks likely that a British company will be contracted to print the new banknotes, although the final decision has not been made yet.

In a third economic announcement, senior coalition officials say Mr. Bremer has named a new interim Central Bank governor and signed a new regulation giving the Iraqi Central Bank independence from the finance ministry and the rest of the government.

The change is supposed to take place immediately, meaning in theory, the Central Bank will be the first Iraqi government department to operate without direct oversight from the coalition provisional authority.