-->U.S. Flies in Millions of Dollars for Iraq
Thu April 17, 2003 04:51 AM ET
KUWAIT (Reuters) - The U.S. Federal Reserve is flying in millions of dollars to pay Iraqi civil servants and start rebuilding Iraq, a U.S. official said on Thursday.
Using $1.7 billion in frozen Iraqi assets seized in the United States, Washington is set to start $20-per-head payments within days to up to 2.5 million Iraqi civil servants.

"When you are flying in planes that have millions on them, you don't want to discuss timing or when and where," the official told Reuters.

"The money, and it is millions, is mainly to pay civil servant salaries, but some of it will go for reconstruction."

Analysts have said it could cost $100 billion to rebuild Iraq, a country battered by two wars in two decades and 12 years of United Nations sanctions.

Iraq, which sits on the world's second largest oil reserves, needs quick infusions of cash because it cannot resume oil exports without legal sanction from the United Nations.

The U.S. official said the Fed was in charge of providing the cash and could not say if more shipments were scheduled.

U.S. officials said on Wednesday that the $20 payments to civil servants will be critical to getting the economy moving again. Iraqis will have to cope with a hotchpotch of currencies including the dollar, other western currencies and the Saddam-era dinar for some time until a new Iraqi authority can implement a new currency, they added.

<ul> ~ Quelle: Reuters</ul>

-->Thursday 17, April, 2003 / Last Updated: 12:04PM Doha time, 10:04PM GMT

Greenback to drive new money system

As Baghdad limped back to some semblance of normality, with all of Iraq under the control of US-led forces, arrangements are being made to have a dollar-driven multiple currency system.

The dinar, issued by the Saddam Hussein government, would remain valid tender until a new unit is introduced, two US officials said on Wednesday. The pair are assessing the economy for the US-led interim administration that will rule Iraq.

They said the new administration would start to issue Iraqi civil servants with a $20 per head emergency payment and could repeat such payments as and when necessary.

"This is not an issue of dollarising the economy, but to get money into desperate peoples' hands," one of the officials said, asking that his name not be used.

Because the previous government had failed to publish any statistics or records, their best estimate was that 1.5 million to 2.5 million Iraqis worked for the government. The total population is estimated at 26 million."We're talking about most working people. They will be entitled to get an emergency payment of $20, in dollars," one official said.

Payments will go to Iraqis who are able to identify themselves as civil servants. The United States will draw on some $1.7 billion in seized Iraqi assets to fund the $20 emergency payments and also to build up foreign exchange reserves.

The officials also said the introduction of more dollars into the economy and its use with other currencies -- the euro and the currencies of neighbouring Syria, Jordan and Kuwait among others -- was not likely to raise inflation, even if the value of the old Iraq currency fell.

"It is not inflationary if the money in your pocket is (already) primarily dollars," one official said. US officials have determined that Iraqis have been using the old Iraq dinar only as a"medium of exchange" and not to store their wealth, held in other currencies.

"The money is there, it is in the mattress system" said the other official, who also preferred to be unnamed. The second official said that whatever Iraqi authority takes over, the country would need between 90-180 days to design a new currency but it would take longer to introduce it.

Other countries, such as Afghanistan, took nearly a year to introduce a new currency, the official said. Until the new currency is set up, Iraq will use the dollar, the dinar and all the other currencies in circulation.

"In our experience countries with these kinds of multiple currency systems function extremely well," one of the officials said.

Officials already serving in the central bank, finance ministry and public banks will be interviewed to determine which could retain their positions.

....

--- Al Jazeera with agency inputs





<ul> ~ Quelle: Al Jazeera</ul>