The US-controlled Iraq Central Bank is printing new bank notes bearing the likeness of Saddam Hussein -- an effort to overcome a severe shortage of Iraqi dinars and to counteract fears of a surge in counterfeit currency.
The crisp new 250-dinar bills -- now worth less than US$0.20 each -- were being issued because of a shortage that is causing a growing liquidity crisis in the country.
Compounding the problem, a new 10,000-dinar note issued just before the war by Saddam's government never won the public's confidence because it was vulnerable to counterfeiting, according to US officials and Iraqi media reports Wednesday.
Issuing new 250-dinar bills "seems to be the best solution even though it does involve printing a currency with Saddam's face on it," L. Paul Bremer said. "It's not a joy."
Last month, Bremer banned the posting of any images or likenesses of the Iraqi leader, a fact he acknowledged Tuesday. However, the need to print the new currency quickly required using already existing equipment.
In Washington, Tony Fratto, a spokesman for the US Department of the Treasury, which is involved in the reconstruction effort, said the 250-dinar note was seen as a short-term measure -- especially given the distrust surrounding the 10,000-dinar note, which was a favorite among counterfeiters.
"It's temporary. No one likes to see Saddam Hussein's face on the currency and at some point that will go," Fratto said. "And, we hope that it will be sooner, rather than later."
The irony of Americans printing Saddam-emblazoned cash was not lost on Iraqis.
"The Americans got rid of the old regime, so why are they printing the same currency?" Mudafar Mahdi, a businessman, asked Wednesday.
He said he feared that by infusing so many notes into the economy, the value of the dinar would slip against the dollar and trigger inflation.
Since the war, when the Iraqi currency traded at roughly 4,000 dinars to the US dollar, the dinar has recovered to about 1,400 to the US dollar.
Bremer, who heads the Coalition Provisional Authority in Iraq, said the Central Bank would begin removing 10,000 dinar notes from circulation by allowing Iraqis to exchange them for 250 dinar notes at face value.
The city's ubiquitous money changers, who line Baghdad's streets waving bricks of the notes at passers-by, generally exchange the 10,000 dinar notes at a less favorable rate against the dollar.
Bremer also announced a new project that would help Iraqis start businesses by connecting would-be foreign investors with local entrepreneurs.
Bremer said the future "business support and information center" would be a joint project of the US-led occupation government, the International Monetary Fund, the World Bank and the UN Development Program.
"Our challenge is to turn around a moribund economy damaged by decades of centralization and state control," he told a news conference.
He also announced a new US$100 million construction fund -- created with seized Iraqi government money -- that will be used to repair Baghdad's damaged government ministries.
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