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| Volume X, Fall 2003, Number 3 |
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| EXCERPT: A Monetary/Exchange-rate Strategy for the Reconstruction of Iraq |
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| Robert Looney |
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Dr. Looney is a professor in the Department of National Security Affairs, Naval Postgraduate School, Monterey, CA.
As the military conflict for Iraq
concluded, a new battle began
over the best way to rebuild the
Iraqi economy. On the one side are those who believe that, by establishing proper institutions and rules, the Iraqis will be able to rebuild their own economy without an extended period of outside oversight and massive financial assistance. Another side sees the necessity of substantial infusions of foreign assistance and technical support over an extended period of time. A possible third group, primarily led by the French and Russians, feels that a new Iraqi government should set a high priority on paying back the tens of billions of dollars in loans taken out by Saddam's government.1 While differing somewhat on ends and means, no doubt all sides would agree that any recovery of the Iraqi economy will entail successfully addressing a daunting set of tasks:
• Repairing a wrecked and neglected banking system that currently has at least three currencies in circulation: "Swiss" dinars, "Sadaam" dinars, and now U.S. dollars.
• Beginning the servicing and restructuring of the country's massive national debt.
• Resurrecting a whole spectrum of dilapidated industries.
• Revitalizing a declining and neglected agricultural sector.
• Propelling an economy based largely on cash, barter and international assistance into the twenty-first century.
• Reestablishing a consuming middle class that has all but disappeared.
• Diversifying an economy that currently depends upon a single commodity: oil.
• Replacing graft and corruption with a streamlined government that can collect taxes and enforce contracts.
• Commencing privatizing of inefficient public enterprises.
1 Richard Rahn, "Coming Battle to Restore Iraq's Economy," The Washington Times, April 9, 2003.
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