Associated Press May 11, 2001

UN Pushes US Dlr As Official E Timor Currency

DILI, East Timor (AP)--The U.N. administration in East Timor announced plans Friday to push for the enforcement of the U.S. dollar as the official currency in the territory.

The head of the U.N. Central Payments Office, which manages East Timor's tiny and shattered economy, told reporters the world body was taking legal and educational steps to ensure the currency becomes the sole legal tender.

"In order to address the implementation of the dollarization more fully, a program has been developed (which) will have political, legal and operational elements," said Fernando DePeralto.

The U.N. has governed the territory since a 1999 vote for independence from Indonesia, which occupied East Timor in 1975.

In January 2000, the U.N. administration introduced the U.S. dollar as the official currency in East Timor. A dozen countries and territories around the world already use the U.S. currency, including El Salvador, Ecuador, Guatemala and Panama.

However, despite the U.N. decision, the Indonesian rupiah and Australian dollar have remained in widespread circulation in the territory.

Although the world body pays its staff in U.S. dollars, many Australian-run businesses prefer to price goods in the Australian currency. And many East Timorese continue to use rupiah to buy cheap Indonesian goods.

DePeralto said he hoped a campaign to educate people about the U.S. dollar would encourage its greater use.

Hundreds of thousands of coins - including almost 100,000 cents - will be imported to facilitate commerce.

The import of foreign currencies will also be prohibited, DePeralto said.

The U.N. also will ban unlicensed money changers. They illegally bring in rupiah into East Timor to exchange for U.S. dollars, where the rates are lower than in Indonesia.

U.S. dollars are then smuggled back into Indonesia.

DePeralto warned that some inflation was inevitable. "Shifting from one currency to another with different denominations will create inflation," he said.

The push to enforce the use of U.S. dollars is likely to anger the some 400 moneychangers who work on the streets of Dili.

"Young people change money because they don't have real jobs. If the U.N. wants us to stop, they have to give us a salary," said John da Silva, a currency dealer.

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