An Iraqi money trader shows Iraqi dinars which cost around 20 U.S. dollars in Al-Samo'al street's, black market, in Baghdad on Thursday, Jan. 7, 1999. Economic sanctions imposed after the Persian Gulf War have crippled the Iraqi economy, causing the dinar's value to plummet and forcing Iraqis to use fistfuls of bills just to buy groceries.ASSOCIATED PRESS

In Iraq, groceries cost fistfuls of cash

Web posted January 12, 1999

By Louis Meixler
Associated Press Writer

BAGHDAD, Iraq -- With the Iraqi currency a mere fraction of what it once was, shoppers must hand over fistfuls of cash just to buy groceries, and grooms looking for a wedding ring need a 3-inch stack of bills.

Economic sanctions imposed after Iraq's 1990 invasion of Kuwait have crippled the Iraqi economy, causing the value of the national currency, the dinar, to plummet.

The problem is that Iraq's largest bill -- the 250-dinar note -- is now worth only about 13 cents. As a result, some Iraqis tote their cash in black plastic bags, while others use burlap bags or cardboard boxes when paying for big-ticket items like appliances.

Before the invasion of Kuwait, Iraq had a thriving economy. One dollar bought 20 dinars on the black market and the largest bill was the vivid red-and-blue 25-dinar note.

Today, a dollar is worth about 1,800 dinars. And most of the 250-dinar bills are crisp and immaculate, evidence that the Iraqi government is printing them at a rapid rate.

Faleh Hassan, the owner of an electronics store in Baghdad's wealthy neighborhood of Mansour, doesn't bother counting the 450,000 dinars he is paid for one of his washing machines. If stacked, the pile worth $250 would be seven inches high.

Hassan simply trusts his regular customers. His clerks count money from new buyers, but he doesn't ask customers to wait while the cash is checked.

Other merchants have found creative ways to count their money. While some measure the height of a stack of bills, Fawzi Dhayif uses his jeweler's scale. A recent test found his method was accurate to within one bill, a discrepancy he blamed on a few dirty notes.

At Dhayif's shop, a gold wedding band costs 200,000 dinars, or $110. That's about 2 pounds of dinars -- and out of the reach of many.

U.N. economic sanctions imposed after Baghdad's invasion of Kuwait forbid trade with Iraq, which means international credit cards can't be used in the country.

Although checks are available, few Iraqis trust the banking system, and many merchants won't deliver goods until a check clears.

Despite the embargo, shops in Baghdad are filled with inexpensive Japanese and Chinese electronics smuggled in from Jordan and Dubai.

The sanctions, however, have devastated the middle class, and only the few rich Iraqis can afford such luxuries.

``Iraqis are worried about food and medicine,'' said Amr Jassim, a goldsmith in the city's Adhamiya district. His shop sells gold wedding bands for 15,000 dinars -- about $8 -- and they are so thin that customers must be careful not to crush them between their fingers.

In 1995, Iraqis fearing that times would only get worse hoarded dollars, sending the price of the greenback to about 3,000 dinars. That was the year Iraq introduced the 250-dinar note, a crudely printed bill featuring President Saddam Hussein on the front.

The dinar recovered some of its value after the government approved austerity measures in 1995 and later agreed to a U.N. plan that lets Iraq sell oil to buy food and other humanitarian goods for its people.

Yet, the dinar's roller coaster ride has left many Iraqis frustrated and confused.

Ceceel George, from Baghdad's middle-class district of Jedida, jokes that she can't decide whether to buy a house or meat. Her three-bedroom home cost 3,500 dinars in 1970, enough to buy 2 pounds of lamb today.

Iraqi officials say privately the government won't print larger bills for fear it would signal to consumers that there is no end in sight to the U.N. sanctions. That could lead to a collapse of the already fragile currency.

Ali Mohammed, a manager at the al-Thahab currency exchange, said many Iraqis with spare cash are saving dinars, hoping that sanctions might be eased.

``Most people keep Iraqi dinars because they expect it will go up,'' he said.

Dhayif, the jeweler, was more cautious.

``We keep dollars or gold,'' he said.