Kuwait’s Currency Declared Invalid by Iraq With AM-Gulf Rdp, Bjt
NICOSIA, Cyprus (AP) _ Iraq, underscoring its control over Kuwait, has declared Kuwait’s currency invalid and set a deadline for all who hold it to exchange it for Iraqi money, the government said Monday.
Iraq will reimburse those who possess Kuwaiti dinars with Iraqi dinars on a 1-for-1 basis, the government said. Those who hold Kuwaiti dinars have until Oct. 6 to exchange it for Iraqi currency, said the announcement, carried by state Iraqi News Agency.
After that date, Kuwaiti dinars will be considered worthless, the Baghdad government said.
Iraq has methodically dismantled Kuwaiti institutions following its Aug. 2 invasion and annexation of Kuwait. Iraqi authorities have officially disbanded Kuwait’s government, military and national airline, and call Kuwait Iraq’s 19th province.
The currency measure was taken ″to facilitate transactions throughout Iraq and ending duality in the monetary dealing,″ the government said.
Before Iraqi President Saddam Hussein ordered his army into Kuwait, one Iraqi dinar was worth $3.22 and one Kuwaiti dinar traded at $3.45 at official rates.
But the Kuwaiti currency was convertible on international markets while the Iraq dinar was not. The Iraqi currency remains inconvertible.
The decision was also expected to eliminate the black market for the Kuwaiti dinar. Although the Iraqi dinar’s official value remains the same, its value to buy goods or foreign currency on the black market was about one-tenth the official rate. Iraq punishes currency smugglers with death.
In the first days of the invasion, the Kuwaiti dinar fell from $3.45 to about one-fifth its value before international currency exchanges suspended trading of the Kuwaiti currency.
″No banks will accept to quote or trade either Iraqi or Kuwaiti dinars,″ a Banque Francaise du Commerce Exterieur official said Monday. That would be forbidden under the freeze on Kuwaiti and Iraqi assets adopted by France and the other European Community countries, the Paris-based official said in an interview.
He said even if there were no economic embargo, no one would trade the Kuwaiti dinar because there is no longer any central bank to guarantee its value. Anyone with Kuwaiti dinars outside the country would effectively be holding useless paper, the banker said.
There are exceptions in extremely limited circumstances. Kuwaitis stranded in London can go to the National Bank of Kuwait or United Bank of Kuwait and get British pounds for their dinars if they have dinar accounts there and can prove that they are in desperate need of funds, according to a financial source in Bahrain.
The Banque Misr, or Bank of Egypt, in Cairo has not been instructed to stop accepting the Kuwaiti dinar, an official of the bank’s foreign exchange department said. The currency was quoted in Monday’s fixtures as usual, though at $2.86.
When the crisis erupted, the Egyptian-Saudi Finance Bank allowed Kuwaitis to exchange 500 dinars at the old rate for two days. Any other funds had to be exchanged at the reduced rate.
The practice appeared part of the exile aid program run by the Kuwaiti government, itself in exile in Saudi Arabia, the financial source in Bahrain said.
Certain local banks may have been given a guarantee by Kuwaiti embassies allowing them to exchange dinars to needy Kuwaiti citizens, the source said.
But it would be impossible for the Kuwaiti government-in-exile to honor all dinars, because Iraq could then try to convert the huge stocks of Kuwaiti cash its soldiers plundered during the invasion, the source noted.
The fall of Kuwait made instant paupers out of tens of thousands of people with assets in Kuwait or Kuwaiti currency.
H. Zahreddin, a wealthy Lebanese businessman doing business in Kuwait, flew home to Lebanon the day before Iraq overran Kuwait to throw a lavish wedding party for his daughter at a plush Beirut hotel.
″I went to bed a millionaire and woke up in debt,″ Zahreddin said later. ″The hotel refused to accept my Kuwaiti dinar check to settle the bill.″