Scrapping the "Saddam" dinar and introducing a new "Swiss" dinar may be the best solution to Iraq's currency question in the short-term, though the country's interim authority must decide for itself, a US official said on Tuesday.
"It's what they decide to do; they may decide replacing the currency with a new Swiss dinar might be a solution for the short-term," the official said. He spoke on condition of anonymity.
"In some ways, they are already making their decision on the ground, and it is clear that they will not want Saddam Hussein on their currency," he said.
There are three currencies in circulation in Iraq. The Saddam dinar, which bears a picture of Saddam, was changing hands at about 2,700 to the US dollar on Sunday.
The more stable "Swiss dinar," so called because it was printed in Switzerland, is an older currency that was in use all over Iraq as the official currency before President Saddam Hussein's regime. It is now in use in the northern part of the country.
Swiss dinars are old and tattered and no longer in print, so there are not enough to go around. New ones would have to be printed, the official said, and the old ones could be exchanged.
The Swiss dinar, not the Saddam dinar, is displayed in a case at the IMF, where the 184 countries that are members of that institution show their currencies.
"They may just want to stay with it. It's a perfectly fine currency," the US official said.
If Iraq chose to do so, its new currency could have a temporary fixed rate and Iraqis could be given a period of time to swap their old Saddam and Swiss notes for the new ones, the official said.
US dollars are also in circulation, but the official said it is unlikely Iraq would choose to have the US dollar as its currency.
Dollars were also in circulation in Afghanistan after the collapse of the Taliban regime; but the country, with advice from the international community, chose to have its own new currency.
"If you're asking if we're going to encourage them to dollarize, the answer is no," the official said.
"I don't think the Iraqis will make that decision. It would make sense, but that would stink of imperialism," the official said.
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