Dollars replace dinars while Iraq awaits new currency

The Saddam dinar, bearing the picture of the deposed ruler, may be changing hands for up to $78 a time on the internet auction site eBay, but on the streets of Iraq the dollar is taking over.

Establishing a new currency will be one of the first tasks facing the provisional government. US treasury experts have already arrived in the country to help, though Washington is keen to stress that it will be up to the Iraqi people to choose their new currency.

"One of the things I'd like to do is ask them, 'What do you want as a currency and whose picture do you want on it?'" said Jay Garner, the retired general who leads the US office for reconstruction and humanitarian affairs.

One option is to adopt the Swiss dinar, the currency circulating in Kurdish-controlled regions. The British firm De La Rue, which originally printed the currency, still has the plates. But though the Swiss dinar has been a more reliable currency than the Saddam version, spreading it nationwide risks exacerbating ethnic tensions.

Iraq could choose to follow the lead of Afghanistan, where the old Afghani note was replaced with a new version after the Taliban fell, a transition which goes on in remote areas. UN officials report that after initial resistance, most traders happily adopted the new currency. "The new stuff feels like proper, modern cash," a Kabul shopkeeper told UN staff.

The Saddam dinar will not be missed. Poorly made, the notes disintegrated and were easily counterfeited.

Iraq could choose to take the dollar permanently. Once a new currency was seen as one of the fundamental building blocks of a new regime, but these days newly independent countries such as East Timor often borrow currencies from other countries in the hope of importing much needed monetary stability.