Dinar Surges in Value

The rising price of the new currency fuels hopes of a strong economic future.

Dinar Surges in Value

The rising price of the new currency fuels hopes of a strong economic future.

Tuesday, 22 February, 2005

Even as Iraqi car bombs, shootings and angry demonstrations flicker over Arab television screens every night, businessmen across the region are still banking on a bright economic future for the war-torn country.

At least that’s the word from local moneychangers, who say that a rush to buy up the new Iraqi dinar lies behind a surge in its value from 1,650 to as high as 1,000 to the dollar in just two days.

“Jordanian businessmen are selling large quantities of dollars to buy the new Iraqi money,” said Nuseir Abbas, director of the Gulf Company for Exchange in Baghdad.

Much the same is taking place in Basra, except that Kuwaitis are doing the buying, says Sabah Faeq, owner of an exchange company in the southern port city.

Egyptian businessmen also have been buying up dinars, with expectations that Iraq's eventual oil wealth would cause the value of the currency to surge, according to a report in Egypt's state-owned al-Ahram newspaper.

The surge in the value of Iraq’s new currency comes as the country's old dinars, each bearing the face of Saddam Hussein, ceased to be legal tender on January 15, making way for the new bills issued last October.

Iraqi importers have also found that the latter are viewed as hard currency abroad.

“It used to be that we'd have to use dollars to buy cars from Jordan and the [United Arab] Emirates,” said Muhanned Rahim, director of the Fatah auto showroom. "Now after the printing of the new currency the companies agreed to export cars in exchange for Iraqi money."

The surge also comes at the beginning of the Hajj - traditionally, a depressing time for Arab currencies, as pilgrims rush to exchange them for dollars to spend in Saudi Arabia.

But this year, Iraq’s new dinar has become the currency of choice for pilgrims.

“The government of the Kingdom of Saudi Arabia has agreed to do commercial transactions with Iraqis in Iraqi currency,” said Mustafa Abdel Razeq Al Mahdawi, director of the Mecca al-Makrama Hajj Company, which specialises in pilgrimage tours.

Dollars and dinars alike are now used in Iraqi shops – a change from the recent past when the US currency normally was used to buy expensive imported goods, such as electronics.

"This reduction [in the dollar] benefits every citizen who receives his salary in Iraqi currency, because he will be able to buy anything that is sold in dollars at a greater value,” said Ali Othman al-Fitlawy, an employee in a public sector grain company.

“A video CD player formerly on sale for 60,000 dinars is not sold for 46,000 dinars,” noted al-Fitlawy.

But Sayf Muataz, a translator for the US military, bemoaned that his 450 dollar salary had dropped to little more than half its former value. "If it continues to go down I'm going to have to look for another job which pays in dinars," he said.

Old-timers, though, took things in their stride, remembering the days before sanctions-era hyperinflation, when each dinar was worth more than three dollars.

"I hope the dinar returns to the same rate that it had in the 1960s and 1970s," said Rasul Hamadi al-Naimy, 65. “Every time the dinar goes up, it brings good things to Iraq and to the Iraqi economy."

Aqil Jabbar is an IWPR trainee journalist.

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