Gold dinar could soon be reality

SINGAPORE, Nov. 15 (UPI) -- The use of a gold dinar for settlement of the international trade balance between Islamic countries could become a reality in 2003. The concept has been spearheaded by Malaysian Prime Minister Mahathir Mohamad, who wants to lessen Islamic countries' dependence on the U.S. dollar. Other countries have expressed interest in the idea recently.

Last week, the Malaysian deputy finance minister, Mohd Shafie Salleh, indicated that Iran had expressed its intention to use the gold dinar for bilateral business with Malaysia. A special economic adviser to Mahathir, Tan Sri Nor Mohamed Yakcop, was also previously quoted as saying that Malaysia would start using the gold dinar in its trade with some Islamic countries by the middle of next year.

Mahathir first raised the idea of an Islamic gold dinar as a standard unit of currency for trade and financial transactions last year. Ever since the Asian financial crisis of 1997-1998, Mahathir has been keen on exploring ways to reduce the risks of currency speculation, which he blamed for the fallout. Although gold can be volatile, it is less so than the U.S. dollar, and has an intrinsic value which paper money does not carry, he argues.

The gold dinar was used as a currency in the Muslim world until the collapse of the Ottoman caliphate in 1924, and an Islamic dinar does exist as the unit of currency of the Islamic Development Bank. But the IDB's dinar is indirectly pegged to the U.S. dollar, with one Islamic dinar equivalent to one special drawing right of the International Monetary Fund. The Malaysian proposal is not to revive the gold dinar as a currency to settle day-to-day payments, but to revive it as a means to settle bilateral payment arrangements exclusively. This means the currency would not exist in a physical form.

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