- The Washington Times - Tuesday, June 3, 2003

It is hard to understand life in today’s Iraq without trying to buy something — anything — in the local economy.

Nearly everything is available in small shops, including bright clothing, prepared foods and liquor. But if you’re paying with dinars, be patient.

Virtually the only bill in circulation is the 250 dinar — a sloppily printed, baby-blue note dominated by a portrait of ousted President Saddam Hussein.

At the current 1,200 to 1,300 dinars to the dollar, even a modest restaurant tab will require a fistful of the soft, oversized bills. Imagine a cash-only economy whose sole unit of exchange is worth about 20 cents.

It is a cumbersome and labor-intensive shopping experience, especially for large purchases, which require shopping bags of notes.

Some cashiers have balance scales to speed the transaction, in part because the uncertain power supply so frequently puts electronic bill-counters out of service. At least a few restaurants and busier shops appear to have a man behind the cash drawer whose sole job is to recount a customer’s payment.

The sheer bulk and volatility of the Iraqi dinar has created an industry of money-changers.

These currency dealers sweat under umbrellas on busy streets or lounge behind counters in tiny shops in every neighborhood. The rates change capriciously, with no one able to state definitively who is setting the value of the dinar or why it fluctuates so often.

Within one randomly chosen hour this week, quoted rates ranged from 1,100 to 1,300 dinars to the U.S. dollar, depending on the location of the money-changer or, more likely, the appearance of the customer. Cash is pre-banded into bundles of 25,000 dinars — 100 pieces of paper currency — which is slightly less than an inch thick.

“Until the central bank is back up, there won’t be stability,” said Peter McPherson, the U.S. adviser to the Iraqi Finance Ministry. The value of the dinar must be officially determined to inspire consumer confidence until a new currency — without Saddam’s likeness — can be introduced.

The miserable state of the dinar is a source of anguish to older Iraqis, who remember when their currency was one of the powerhouses of the Persian Gulf. Before the 1991 Gulf war, a single Iraqi dinar was worth three U.S. dollars. Today, it is not convertible.

Last year, the government finally began printing 10,000-dinar notes — a more substantial bill with a watermark and metal fibers — but few merchants accept them. Counterfeits are obvious but widely circulated, and no one wants to take the risk, despite U.S. efforts to guarantee the note’s value.

Even with the dinar’s relative new strength, it is not a currency that will last much longer — politically or physically.

Washington has for weeks been flooding Iraq with more than $1.3 million worth of small-denomination U.S. currency in an attempt to stabilize the economy, pay workers and wean people from the nearly worthless “Saddams” until a new currency can be introduced.

The expectation is that the new Iraqi authority will design and print a new currency, which will be widely circulated and as reputable as the “Swiss dinar” still in use in the Kurdish areas of northern Iraq.

[The British Broadcasting Corp. and London’s Financial Times said last month that the pre-1981 Iraqi currency was so-called because the notes were printed in Switzerland, but a more recent Wall Street Journal article contends the nickname refers to its stable value.]

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