Islamic countries should continue to use paper money – INCEIF

January 18th, 2011 → 7:11 pm @

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Islamic countries should continue to use paper currency instead of gold dinar as history has shown that the return to the coinage system could increase interest rates and inflation would be difficult to control.

Professor of Comparative Economic History at International Centre for Education in Islamic Finance (INCEIF), Dr Murat Cizakca, said money should serve as a medium of exchange, not as a commodity.

kelantan dinar 300x300 Islamic countries should continue to use paper money – INCEIF

The Kelantan state's Gold Dinar.

“We need to continue with paper currency, and the central banks controlling paper currency should have full autonomy,” he said.

Cizakca said this at a public lecture entitled, “Islamic Gold Dinar: Myths and Reality” organised by the Association of Chartered Islamic Finance Professionals and INCEIF here Monday.

He said gold supply was dominated by non-Islamic countries.

“The gold dinar will be exposed to speculation as the gold price also have its ups and downs. Thus, Islamic countries should continue to use paper currency and increase trade between each other, and eventually in the future agree to a common paper currency,” he said.

Meanwhile, Azrul Azwar Ahmad Tajudin, chief economist, strategic planning of Bank Islam Malaysia Bhd, said history has shown that the use of currency based on commodity would not help to control inflation.

“If inflation cannot be controlled, the real value of a worker’s pay will decline,” he said.

Azrul said this when commenting on Cizakca’s call to Islamic countries to continue to use paper currency instead of gold dinar.

Source: BERNAMA

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