| An Iraqi boy bites a currency note in Basra. (Reuters)
Kuwait, April 16 (Reuters): Iraqis will use US dollars and other currencies including the dinar issued by the ousted government until an Iraqi authority introduces a new unit, a process that could take time, US officials said today.
Two US officials, assessing the economy for the US-led administration that will rule until Iraqis take over, said that within days the administration would start to pay Iraqi civil servants a $20 per head emergency payment and could repeat such payments as 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.
As 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 to US officials.
The US will partly use $1.7 billion in seized Iraqi assets for the $20 emergency payments, for salaries once they resume and to build up foreign exchange reserves, one of the officials said.
It is unclear when a new Iraqi interim government can come into power, with one senior UK official recently predicting it could take more than six months to set up an elected government. Others have predicted it could take up to one year.
The officials said the introduction of more dollars into the economy and its use with other currencies Ä the euro and the currencies of neighbouring Syria, Jordan and Kuwait among others Ä was not likely to cause a cycle of 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.
U.S. 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 asked that his name not be used.
The second official said that whatever Iraqi authority takes over, the country would need between 90-180 days to design a new currency but that it would take longer to introduce it.
Other countries, such as Afghanistan, took nearly a near to introduce a new currency, the official said.
Meanwhile, until the new currency is set, 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.
They also said that the country's finances had been abused for 25 years by the ousted government of Saddam Hussein.
”Public finance in this country has been for one purpose and that is to take the wealth of the country and use it to acquire power, loyalty and physical elements of power,” one official said.
”It has been done in secret...and professional administrative people were not allowed to perform.”
The two officials said that it would be up to the U.S. military to gauge whether Baghdad was secure enough for the U.S.-administration led by retired U.S. General Jay Garner Ä already operating in a southern port Ä could move fully into the country.
Once Garner's Office for Reconstruction and Humanitarian Assistance could move to Baghdad, officials already serving in the central bank, finance ministry and public banks will be interviewed to determine which could retain their positions.