BAGHDAD, 16 October 2003 — Iraqis crowded into banks yesterday to swap tattered banknotes for crisp new currency issued by the US-led administration, which is seeking to erase the image of Saddam Hussein from postwar Iraq. Bank staff confiscated large quantities of fake notes at heavily guarded exchange points in the capital on the first day of an ambitious program to recycle four trillion dinars in the next three months.

“It is going well here. We are taking care of our longtime customers, but we are finding and confiscating lots and lots of illegally printed 250 dinar and 10,000 dinar notes,” said Rasheed Bank branch manager Lamia Al-Moussawi at the small whitewashed building serving the Sarafiya district of Baghdad.

Iraq issued millions of banknotes without anti-counterfeiting safeguards such as watermarks after United Nations sanctions were imposed in 1990. Older bills, popularly known as Swiss dinars, continued to circulate in the north, governed as an autonomous region by Kurds since it was wrested from Saddam’s control in 1991.

The US-led administration has ordered all images of Saddam to be removed from monuments, murals and school textbooks. But in the months following the war it was forced to print billions of dinars bearing the face of the deposed dictator to ease a shortage of low-denomination bills.

The new Iraqi notes, modeled on the older Swiss dinar, carry pictures of an ancient Babylonian ruler and a 10th century Iraqi mathematician in place of the smiling face of Saddam. Six new denominations ranging from 50 dinars to 25,000 dinars will replace both the Swiss notes and Saddam-era bills circulating in central and southern Iraq.

Iraqis can trade in their old bills at 250 bank branches across the country, at a rate of one new dinar to one Saddam dinar and 150 new dinars for each Swiss dinar.

One woman, Khawla Ibrahim, said the Sarafiya branch had turned her away because she had no account, though she was told she could swap her old notes there later in the week. The new notes are printed by the same firm that made the old Swiss dinar — Britain’s De La Rue Plc .

On Baghdad’s Nidal Street, Mohammed Kassem heaved two heavy sacks he said contained five million old dinars toward the counter of the privately-owned Warka Investment Bank. “It will only take me a few hours,” said Kassem, a professional money changer with several outlets in the capital.

The dinar edged down in value yesterday, fetching 2,100 to the dollar, compared to 1,900 to 2,000 earlier in the week, as Iraqis bought greenbacks to avoid being caught with fake notes. “Iraqi law does not protect fools,” said Saad Al-Obaidi, manager of the state-owned Rafidain bank in Athamiya, referring to customers unable to exchange illegal currency. “They do not get anything except an official receipt, but they are out of luck, they cannot get any new money back.”

Tellers stacked bundles of violet-colored 250 dinar notes bearing Saddam’s visage and ran them through new counting machines, face down. Iraqi policeman Salah Abdullah held up two counterfeit 10,000-dinar notes in lurid purple that he said he had received in his latest pay packet from the US-led administration. “I cannot put them into my account and I don’t know what I can do about it. Maybe I can go back to our paymaster.”

Underlining American support for the new dinar, US Commerce Secretary Donald Evans was due to attend a ceremony to mark the launching of the bills. Heavy security was in place for the event at Baghdad’s fortified airport, as US-led forces struggled to restore stability to the country plagued by daily violence.

A few Iraqis were saddened to see Saddam’s face slowly disappear from public view, and 400 people protested outside a bank in the streets of Baqubah, 60 kilometers northeast of Baghdad. The demonstration also marked the anniversary of a referendum staged by the former ruling Baath Party in 1995 and again in 2002 to provide a show of total support for Saddam.

Meanwhile, the Japanese government said yesterday it would provide $1.5 billion in grant aid for the reconstruction of Iraq in 2004 and planned to make a further pledge at a donors’ meeting next week.

The pledge comes ahead of a meeting with US President George W. Bush tomorrow, who in an interview aired earlier yesterday thanked Japan for its contribution to Iraq reconstruction.