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Iraq takes step toward rebuilding economy with new currency

BAGHDAD, Iraq—Issam Aljubory walked into a small market in the Iraq capital's Karrada district and held out a slim stack of brightly colored bills to merchant Osama Saad.

Aljubory, 40, wanted to show his friend Iraq's new currency, which was distributed for the first time on Wednesday.

"Look, I can put it in my pocket," he said, noting the big change from the thick bundles of "Saddam dollars" once needed to make even the smallest purchases.

Coalition banking officials said the new currency is an important step in rebuilding Iraq's war-torn economy and restoring confidence in its once-corrupt banking system.

The bills mark another important psychological break with the past by getting pictures of the fallen dictator out of people's wallets.

Some 2,300 tons of new currency, worth $3 billion, were flown into Baghdad International Airport on 27 Russian cargo planes. The bills, which harken to Iraq's pre-Saddam Hussein currency, some bearing the image of ancient Babylonian King Hammurabi—come in denominations ranging from 50 dinar to 25,000 dinar. Over the next three months they will replace 9,000 tons of old Iraqi bills, which will be burned.

"This is an important day for the Iraqi people because it lays down the foundation for economic growth," said Sinan al Shabibi, the governor of Iraq's Central Bank. "And it's important because it shows that Iraq is on the road to political independence."

Exchanges for trading in old bills for new were available at 250 locations across the country. Arrangements are also being made for mobile sites in remote areas, said retired Brig Gen. Hugh Tant III, a former Army budget chief who is overseeing the currency project.

In some Kurdish areas, people are still using currency that predates Saddam because they did not want to carry pictures of the dictator, and those, too, can be traded in.

U.S. tanks were stationed at the entrances of Baghdad's 18 main banks on Wednesday, in case of a terrorist strike after days of suicide bombings in the Iraqi capital.

But all was quiet outside and inside the Bank of Baghdad. Only a scattering of Iraqis came in to exchange their bills.

The old bills will be good for three months. Many Iraqis said they would get new money through their regular banking and shopping routine.

"There is no hurry," said Juma Alwan, 37, who has operated a cigarette cart on al Sadoun Street in downtown Baghdad for 13 years.

Alwan said he liked the new currency because it was hard to counterfeit. The old currency was printed on poor-quality paper and was easy to reproduce.

"This won't fade," the merchant said. "No one can fake it."

Confidence in the currency is the first step in building confidence in Iraq's shattered banking system, said George Wolfe, director of economic development for the coalition.

He said the next steps are to make cashing checks easier, expand the ability to transfer money into the country and bring the banks up to international standards.

Those steps are expected to entice people to use the banks in a country where only one-third of the $3 billion in currency in circulation is deposited. The rest is hidden in homes or held in safes in businesses.

"It's going to require a change in the business culture," Wolfe said.

U.S. Secretary of Commerce Don Evans, who visited the main currency distribution station on Wednesday, urged U.S. companies to begin to explore entrepreneurial opportunities in Iraq.

He waved off the string of suicide bombings and gun battles in the capital city as "isolated incidents" that shouldn't deter investment.

"There's always risk in business," he said. "If I were in the private sector today I would be exploring opportunities."


(c) 2003, Knight Ridder/Tribune Information Services.

PHOTOS (from KRT Photo Service, 202-383-6099): USIRAQ-MONEY