People lined up outside banks, protected by US tanks and other armoured vehicles, to receive the new notes in exchange for the old bills that carried the grinning picture of Saddam Hussein.

"This operation will help the dinar, which today goes for 2010 to the dollar. We believe it will go down to 1700," Chamas Sabri, a director of the Warka investment bank said.

The new notes are in the denominations of 50, 250, 1000, 5000, 10,000 and 25,000.

The US-led occupation administration hopes the operation will help restore the credibility of the Iraqi dinar which was over-printed and easily counterfeited in the earlier era.

Modern notes

The new banknotes, printed in Britain, boast of the most up-to-date anti-counterfeit features, including watermarks, a security thread, raised letters, an optical variable ink and other variations to thwart counterfeiters.

US-occupation administrator Paul Bremer had announced in July that new banknotes would replace the locally-printed  dinar in use after the UN slapped sanctions on Iraq for invading Kuwait in 1990.

This operation will help the dinar, which today goes for 2010 to the dollar. We believe it will go down to 1700"

Chamas Sabri,
Director, Warka investment bank

Banking officials hope the new dinar will contribute to the stabilization of market prices and bring about a single exchange rate against foreign currencies.

The new money has roughly the same value as the current banknotes – about 2000 dinars to the dollar.

Iraqis who hold old dinars but live abroad will have to return to the country to trade them in.

Iraqis will have until 15 January to exchange their old bills for the new ones. 

The logistics of introducing the currency have been enormous.

Large planes have been flying into Baghdad from London several times a week for the last fortnight transporting the new notes, followed by small plane deliveries to Mosul in the north and Basra in the south.