The US-led coalition authority in Iraq is to print a new Iraqi dinar to replace rival currencies now circulating in the country.
Paul Bremer, head of the provisional authority, said on Monday a new Iraqi dinar would be printed and circulated later in the year.
The new currency will be swapped for both the "Saddam dinar", which circulates in most of the country, and the older, so-called "Swiss dinar", which is used in the northern Kurdish areas.
Mr Bremer said the new unit would be exchanged one-for-one with the Saddam dinar and at a rate of 150 new dinars to one Swiss dinar. The swap would begin in October and last three months.
De La Rue, the British banknote-printing company that originally produced the "Swiss dinars", said on Monday it would lead a consortium of currency manufacturers to print the new notes, sparking a rise of nearly 9 per cent in its share price.
But the company said it would not speculate on the value of the contract, which will depend on the size of the note issue and the security features required.
The currency announcement follows a long debate within the US-led authority over the best way to restore monetary stability to a country long used to having Saddam Hussein's regime fuel rampant inflation by printing banknotes at will.
The plan to create a new currency to exchange for existing ones appears similar to the scheme used after the collapse of the Taliban regime in Afghanistan.
There, the new currency was swapped for the old Afghan unit and the informal currencies circulating in areas ruled by local warlords.
The International Monetary Fund, which also advised on the Afghan currency regime, has had some of its officials in Iraq in recent weeks.
The US at one point had plans to manufacture more "Swiss dinars" - a relatively strong currency whose production predated the Saddam dinar - the original printing plates for which were also held by De La Rue.
Other officials involved in the process said initial plans were shelved when the US encountered unexpected difficulties on the ground. Dollars also circulate widely in the Iraqi economy, and the US imported more dollar bills into the country to make initial payments to Iraqi workers.
The provisional administration was then forced to instruct the Iraqi central bank to print more Saddam dinars - banknotes decorated with a picture of Mr Hussein - after Iraqis complained that the 10,000 dinar notes they were paid were too large for everyday transactions.
Mr Bremer also said yesterday he had approved a budget for the second half of 2003, more than half of which was to be funded by an estimated $3.5bn in oil revenue.
By Alan Beattie in Washington
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