FROM THE OFFICE OF PUBLIC AFFAIRS
October 22, 2004
JS-2056
Remarks on the Occasion of the One-Year Anniversary of the Iraq Currency Exchange
Under Secretary of the Treasury for International Affairs
October 22, 2004
One year ago this week the Iraqi people, working with the United States and our coalition partners, embarked on a difficult economic mission: to replace completely Iraq's deteriorating and easily counterfeited currency and to restore economic and financial stability to their ravaged economy.
After years of hyper-inflation and falling incomes under Saddam's regime, everyone knew this was an essential reconstruction task. But many doubted that a nation-wide currency exchange could be accomplished – What if the Iraqis didn't accept a new currency? How would the new currency be distributed to millions of people in hundreds of cities and towns? What if terrorists sabotaged the distribution?
Now, one year later, a new currency is circulating throughout Iraq and the Iraqi currency exchange is hailed as a success. The exchange rate is steady, price stability has been restored, and economic growth this year is 50 percent, one of the highest rates in the world.
The new Iraqi dinar is a sturdy and secure currency, imprinted with traditional Iraqi symbols – altogether a great improvement over the flimsy bills with Saddam's face.
Demand for the new currency has been so strong that the Iraqi government has earned an amazing $5 billion in seignorage during the past year just supplying it. And Iraqis are using the newly-minted dinars to purchase goods-- fresh bananas from the Americas, chickens from around the world, new and used cars--at stable competitive prices in markets in Basra, Baghdad, Irbil and Mosul.
The Iraqis are building upon these successes as they take responsibility for their economic future. Iraqi officials in the newly constituted Central Bank now conduct monetary policy, supervise the banking system, and review the growing number of applications for banking licenses.
At the Finance Ministry, Iraqis are developing next year's budget according to international best practices as laid out in their new Financial Management Law.
Iraq has re-engaged with the international financial community; it just entered into a strong agreement with the International Monetary Fund, approved and welcomed by the all the G7 countries.
Earlier this month, Iraq's Finance Minister was in Washington at the annual meetings of the IMF and World Bank to engage with the world's economic leaders and make the case for erasing a large part of the crippling international debt run up by Saddam.
As President Bush mentioned in the St. Louis debate, the Finance Minister was amazed that the U.S. press coverage missed all this good economic news about his country.
The successful introduction of a new currency--one of the crucial first steps in the stabilization of Iraq's economy--did not occur by accident. It was the outcome of extensive and careful advance planning and close international cooperation begun in 2002 and culminating in the final approval by President Bush in the spring of 2003.
I remember putting the plan forward in the White House situation room with the President asking tough questions of all of us--Treasury, Defense and State--about the economic significance, market acceptance, security, and logistics. Only after all his questions were fully answered did he give the go ahead.
Then the plans were put into operation with the Iraqis and the Coalition Provisional Authority working together. To make this all happen, twenty-seven 747 planeloads of the new currency were printed in record time at seven different locations around the world.
The currency was then flown into Baghdad, and distributed to over 250 distribution points all over the country. Millions of Iraqis came with bags full of old currency, and lined up to get the new currency.
Finally, the old currency was destroyed. A retired U.S. general, who had been running a bank in the United States, volunteered to oversee logistical operations.
He sent situation reports from Baghdad to Washington and other coalition capitals everyday. Each report concluded with his motto "Teamwork That Works!" And it did work.
Link ~
http://www.treas.gov/press/releases/js2056.htm
And ...
USAID gives the Iraqi people a chance to attain economic freedom
New Currency Pays Tribute To The Iraqi People ...
Under Saddam Hussein’s rule, Iraq was marked by many divisions which included religious, political, ethnic, and economic.
Iraq’s currency also reflected a division with two currencies – one in the north and another in the south. Saddam’s mismanagement of the Iraqi currency – running the printing presses whenever he needed cash – disabled the Iraqi economy, causing high inflation and plummeting living standards.
The Iraqi people were forced to use only two denominations of currency: the 250 dinar note and the 10,000 dinar note. This is the rough equivalent of using only dimes and $5 bills for all monetary transactions.
Initiative
Beginning in late 2003, the Coalition Provisional Authority (CPA), with assistance from USAID and the U.S. Department of Treasury, conducted a four-month program to exchange Iraqi’s old currency for a new currency - including the facilitation and management of putting 4.62 trillion new dinars into circulation, while also destroying the old currency.
The old currency which featured Saddam Hussein has been replaced with a new design which pays tribute to the Iraqi nation and its history.
Iraq’s new currency has six denominations which is making daily economic life far more convenient in Iraq and is ensuring that transactions are smooth and accurate. Along with a reform of the banking system, USAID is working to develop an independent central bank, new trade laws, and a modern commercial code.
Results
The conversion to a new currency is a significant accomplishment that is giving the Iraqi people a chance to attain financial freedom in a modern market economy.
This project represents a major economic and logistic effort in Iraq. With the conversion to a new, single currency, one of the last, daily reminders of Saddam Hussein’s rule is being eliminated.
The new Iraqi currency has earned the confidence of the Iraqi people – it is being used throughout the nation and has not only held its value, it has strengthened.
The currency exchange will put Iraq on the path to full membership in the global economy. A stable Iraqi currency will encourage countries interested in trading with Iraq and businesses wanting to invest in the country.
Links ~
http://www.usaid.gov/stories/iraq/cs_iraq_currency.html
