- The Washington Times - Tuesday, June 3, 2003

BAGHDAD — The dairy truck stops in the upscale Zayoona neighborhood twice a week, but Auhood Sulman is buying only enough yogurt and cheddar cheese for tonight’s dinner.

Mrs. Sulman, a retired geography teacher, has a few thousand dinars left from the sum she borrowed from neighbors after the war ended. She has been stretching the notes as much as possible, buying only what her family immediately needs and refusing to invest in perishables that will spoil when the power inevitably goes out.

“I spend as few dinars as I can each day, because this money is all I have,” she said. “We are not eating meat. We are not buying anything except for a little food, nothing unless it is absolutely necessary.”

Mrs. Sulman, elegant in a green jacket and long black dress on a sweltering Baghdad afternoon, says she has plenty of U.S. dollars and Iraqi dinars on deposit in the state-owned Rashid Bank, but that she can’t withdraw money until the Americans get her branch open again. Until then, the family is penniless.

“We will have to sell her jewelry soon,” her husband said, waving with contempt the change from the yogurt.

The price of dairy products, often subsidized by the main supplier here, has remained constant. But Baghdad’s cost of living has gone haywire since the U.S.-led war began March 20.

Almost no one has drawn a paycheck since March, creating a hardship that the American authorities are trying to alleviate with emergency payments of $50 a person. The Pentagon’s reconstruction office has begun paying utility workers April salaries, but hundreds of thousands of civil servants are waiting, increasingly impatiently, for their piece of the $135 million that will be disbursed during the next few weeks.

As the occupying power here, the United States and its coalition partners have been trying to stabilize the Iraqi economy. Foreign experts here know they have a problem, but they cannot identify nor quantify it.

“We have no records, no indicators,” said Peter McPherson, the former University of Michigan president who is advising the Iraqi Finance Ministry. “We have no consumer-price index, no inflation charts, no useful data at all.”

Mr. McPherson said it would take several weeks for his group to pull together some informal indicators of the situation.

Eight weeks after the regime was ousted, the crisis appears to have eased somewhat for many families. But the sudden influx of cash payments — more than $1 million a day, mostly in U.S. one- and five-dollar bills — fuels the inflation that swelled with the war’s opening salvos and has continued, for the most part, through the collapse of the regime and the continuing chaos.

The price of vegetables, for example, soared by nearly 50 percent during the war. Even though Iraq is deep into the summer harvest, and ripe tomatoes, crisp cucumbers and fragrant apricots are plentiful, their prices have remained high by Iraqi standards.

“It is because of the gasoline,” said Muna, a single mother in the rough Betaween neighborhood who relies on remittances from Egypt to make ends meet. “I think it costs a lot to bring the vegetables here.”

Others suggest that postwar price gouging is to blame, as no central government exists to regulate prices. Nor is there a credible police force to rein in the organized looting that has crippled infrastructure, wrecked government buildings and damaged the national psyche.

Despite subsidies and free government food rations, Iraq is in a period of economic, political and social transition. The ramifications are sweeping, but the shock waves were first felt — seismically — in Iraqi wallets. Instability and insecurity have made people too wary to spend money even if they have it.

Satellite dishes with 24-hour foreign news, European sports and American movies are available for the first time in Iraq, starting at $280 for a cheap Chinese dish. But the families that can afford satellite TV have probably spent that amount, more than a month’s wages for many, on the electric cabling to hook up their homes to neighborhood generators.

Power in Iraq has always been a negligible expense, including gasoline at 4 cents per gallon and heavily subsidized electricity. But after seven weeks of shortages, people are paying whatever it takes for a few hours of air conditioning and incandescent light.

Power in any form is suddenly expensive here, sending prices sky-high for drinking water, gasoline and propane gas, or anything that requires it. Electricity from the battered grid is rarely available for more than a few hours at a time, and because it’s always a surprise, few families can fully take advantage of it. Noisy generators rumble throughout the day in upscale neighborhoods and outside hotels catering to foreigners.

The desert summer’s extreme heat, compounded by the lack of air conditioning, has brought down the price of eggs to almost half their prewar cost. A flat of two dozen eggs costs about $2, with merchants reluctant to keep them around for more than a few days.

Even so, they are a luxury for many families still waiting for their April and May salaries. Meat is also too expensive for many.

The good news — for some Iraqis, anyway — is that the dinar is slightly less worthless than it was two months ago. The currency has climbed steadily from its wartime low of 4,000 to the dollar to about 1,200 dinar to the dollar this week.

But the stronger currency has done little to raise the purchasing power of most families. Few merchants are lowering prices to prewar levels, while dollars are the norm to buy the imported goods flooding the market.

Traders have created a constant demand for U.S. dollars, which they use to import everything, including Egyptian refrigerators, Indian Viagra, Italian pasta and Turkish beer.

The newly porous borders have kept inflation down, said Mr. McPherson, the senior U.S. adviser to Iraq’s Finance Ministry.

“A lot of [American money] is going out over the borders for imported goods,” Mr. McPherson said in an interview last week. “It’s not like we’re printing money.”

Another complication created by 13 years of sanctions and six years of the U.N.-administered oil-for-food program is that most Iraqis are dependent on free staples distributed by the government. The monthly marketbasket of rice, flour, edible seeds and cooking oil will be continued for six months, but no one, including Mr. McPherson, can predict whether the economy will be strong enough for people to begin paying for food again.

Sala Hijeeb, 22, the mother of a young boy, has known almost nothing since reaching adulthood but government rations, supplemented with carefully purchased groceries. Asked how she and her husband, an electrician, will cope with salaries and new responsibilities, she seemed dazed.

“I don’t know,” she said. “The government used to take care of us, and now we are waiting to see what the Americans will do. I hope they don’t forget about us.”

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