Accessibility links

Breaking News

Iraq: Dollar's Fall Hurting Ordinary Iraqis

The value of the U.S. dollar has fallen around the world with respect to major currencies like the euro, but -- surprisingly perhaps -- it has also dropped against one of the world's weakest currencies, the Iraqi dinar. The reasons for the dollar's fall in Iraq are mostly local and unrelated to the U.S. currency's problems in the rest of the world. Nevertheless, the drop is making life difficult for ordinary Iraqis, many of whom are paid in dollars yet must buy their goods with dinars. RFE/RL reports from the Iraqi capital.

Baghdad, 20 May 2003 (RFE/RL) -- The value of the U.S. dollar is dropping in the Iraqi capital, Baghdad, making life harder for ordinary residents.

A month ago, a dollar would fetch about 3,350 dinars in the city's currency markets. Today, that same dollar buys just 1,400 dinars. At the same time, prices for many ordinary items -- denominated in dinars -- remain at wartime levels.

The currency fluctuation affects many Iraqis who are paid in U.S. dollars but must still use dinars to buy food and everyday items.

Experts say the reasons for the dollar's drop in Iraq are mostly local and are not related to the recent fall of the U.S. currency against major currencies like the euro. The U.S. government has pumped millions of dollars into Iraq since the end of the war and this oversupply has made each dollar worth less.

At the same time, there is a shortage of dinars. Savings banks are closed and people cannot withdraw their cash. The Central Bank of Iraq has been looted, as have many of the state-owned banks. No new dinars are being printed.

Ahmed Jabber Assaab, an independent analyst, explains: "The [U.S. administration] has pumped [U.S. dollars into the market] by paying salaries for government employees and retired people in big sums and having no substitute for the Iraqi currency. There is an absence of printing of [Iraqi] money."

Assaab says the United States has already pumped in about $3 million through payments to state employees and will soon start making payments to retired persons. He adds that dollars are also flowing into the country from returning Iraqis and the presence of many thousands of foreign aid workers, journalists, and soldiers.

The problem is aggravated by persisting high prices for food and everyday items. Prices rose during the war and have remained at wartime levels. Six months ago, a kilogram of meat cost about 4,000 dinars and a liter of gasoline cost about 50 dinars. Now, meat goes for around 6,000 dinars a kilogram and gas costs some 500 dinars a liter.

Ali, a shopkeeper, says the prices of goods in dinars are as high now as they were before the slide of the U.S. currency.

"[Concerning food,] some of the imported goods are falling in prices. [However], we noticed that meat; chicken, vegetables, and fruits stay at the same high price. These products are on sale in dinars and it has an effect on us," Ali says.

Hafud Al Zubeidi, a shopkeeper selling carpets, says the consequences of the slide are dire for his business.

"We don't know how we will manage our business in the upcoming days because we have a lot of goods and we bought our goods when one dollar was at 2,000 or 3,000 dinars, and now it has fallen down in a very dramatic way," Al Zubeidi says.

Weesam, who refused to give information about where he worked, says salaries in general were higher under deposed Iraqi leader Saddam Hussein.

"The situation under Saddam's regime was much better because people got salaries and bonuses and it is more than [the Americans] are giving now. We lived better only spending bonuses than we are now supposed to live on [U.S. payments of] $20. There is no use for [the $20]," Weesam says.

During Hussein's rule the average salary was nearly 4,000 dinars, but bonuses were also paid. The bonuses for state employees were as high as 50,000-100,000 dinars or even more, and the prices were controlled by the state.