Generals once knew that after a war, the vanquished must get their economy up and running again, and to accomplish that, the first order of business must be the establishment of a sound currency.1
-Steve H. Hanke, Senior Fellow, Cato Institute
TO REBUILD IRAQ, we have to create conditions for the Iraqi people where independence is possible in a state that has quashed initiative and participative government for decades, if not centuries. One fundamental mainstay and confidence builder, among others (such as job creation), is a strong banking and financial system that supports economic growth. American leaders claim that Iraq is progressing in terms of security, but without such tangible evidence of self-determination as a sound currency and an interbank market, any appearance of progress may be illusory.
The International Monetary Fund, World Bank, U.S. Agency for International Development (USAID), and U.S. Departments of Defense and State are conducting programs to foster Iraqi financial independence and pave the way for prosperity.
Multinational Corps-Iraq's "money as a weapon" concept includes several of those ongoing programs-the Commander's Emergency Response Program (CERP), the Rewards Program, and the more recent micro-loan program-which are helping restore Iraq's economy. The CERP, which was established shortly after President Bush declared "mission accomplished," allows commanders to purchase goods and services for humanitarian relief and reconstruction to the benefit of the Iraqi people. The Rewards Program provides funds so that Soldiers can pay informants for information such as the locations of weapons caches. Both programs provide quick money to answer pressing needs without requiring answers to a host of questions. Moreover, when coupled with public works and infrastructure projects to restore critical services (e.g. telecommunications, water, sewer, gas, electricity), the programs create livelihoods for Iraqi citizens. The micro-loan program provides small loans to help individuals start or improve a business. Altogether, the programs should have a lasting civil-relations impact.
Operation Iraqi Freedom (OIF) commanders have emphasized the importance of such cash management. For example, the former commander of the 1st Cavalry Division, Major General (now Lieutenant General) Peter W. Chiarelli, stressed the importance of "economic pluralism" in a Military Review article about full-spectrum operations.2 General David H. Petraeus has noted that "in an endeavor like that in Iraq, money is ammunition. In fact, depending on the situation, money can be more important than real ammunition."3
Although the aforementioned programs boost individual income, stimulate trade, and buy goodwill, on their own they cannot restore Iraq's deteriorated economy. Without reform and modernization in the banking structure, the health of Iraq's economy is in question. We in the U.S. Army financial community, including contracting and civil affairs specialists, are working determinedly to move the Iraqis toward a more contemporary currency and banking environment.
Banks and the New Dinar
When initial hostilities ended and the Coalition Provisional Authority (CPA) removed most remnants of the former Iraqi government bureaucracy, military organizations (primarily U.S.) filled the voids in government agencies with officers whose professional skills best fit the functions of the vacated job. Consequently, some members of the Army Finance Corps became provincial ministers of commerce. For the most part, their duties involved resuscitating looted and bankrupt banks. Finance units facilitated salary and pension distributions for government employees, transported old and new dinars during the currency exchange, audited the books, planned bank renovations, ordered automation equipment, implemented computer training, and secured funds seized in raids (including $750,000 found with Saddam himself). …