Sunday, September 25, 2005

Iraq's Central Bank builds credibility with rock-steady dinar value

BAGHDAD: If Iraqis have one solid economic achievement to hold on to amid their many problems, it is the strength of their currency, which some feared would be devalued out of existence in the months that followed the fall of former Iraqi President Saddam Hussein in March 2003.

The dinar's current value of 1,465 to the benchmark U.S. dollar is virtually unchanged from January 2004, when the introduction of new banknotes to replace the Saddam-era denominations was completed.

Sadoon Hamoud Kathir, professor of economics and administration at the University of Baghdad, attributes this remarkable level of stability to sound government policies - specifically the transformation of the Central Bank of Iraq (CBI) into an independent body, which took place at the same time the new banknotes were issued.

"The most important move the Cabinet made was to separate the authority responsible for monetary emission from the government and to make it independent," said Kathir. "The CBI's goal is to restore the stability of the Iraqi dinar against other currencies," said an official from the bank speaking "I'm very optimistic about the current situation," he said. "And I have confidence in the economic policy of the new government."

Apart from the fact that Iraqis are generally comfortable using their national currency because they can reasonably assume the exchange rate is not going to suddenly rocket out of control, dinar stability brings other economic benefits.

Businessmen are happy because the price they pay for imported goods remains steady. As Ali Hussein, who sells footwear wholesale to traders at the Al-Shorja market in Baghdad, says he does well out of exchange-rate stability. "Although the dinar has appreciated [since 1993], everything is still expensive," he said. The Daily Star

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Regards Marcel.