Economic chaos in Iraq
Source Marvin Gandall
Date 06/08/30/21:03

August 26, 2006
Weary Iraqis Face New Foe: Rising Prices
New York Times

BAGHDAD, Iraq, Aug. 25 — For Mehdi Dawood, Iraq’s failures have leached into
the cucumbers, a staple of every meal that now devours a fifth of his
monthly pension.

And it is not just the vegetables. Fuel and electricity prices are up more
than 270 percent from last year’s, according to Iraqi government figures.
Tea in some markets has quadrupled, egg prices have doubled, and all over
the country the daily routine now includes a new question: What can be done

“Meat, I just don’t buy it anymore,” said Mr. Dawood, 66, holding
half-filled bags at a market in Baghdad. “It’s too expensive.”

“We are all suffering,” he said. “It’s the government’s fault. There is no
security. There is no stability.”

As if Iraqis did not have enough to worry about. Going to the market already
requires courage — after repeated bombings there — and now life’s most basic
needs are becoming drastically more expensive.

Three months into the administration of Prime Minister Nuri Kamal al-Maliki,
the inflation rate has reached 70 percent a year, up from 32 percent last
year. Wages are flat, banks are barely functioning and the consensus among
many American and Iraqi officials is that inflation is most likely to

Violence, corruption and the fallout from decades of government control are
kicking up the price of nearly everything, especially fuel, which in turn
multiplies the production cost for goods.

“It’s a very serious problem,” said Anthony H. Cordesman, a Middle East
analyst at the Center for Strategic and International Studies in Washington.
“You don’t have stable trucking; you don’t have stable distribution. You
have a constant protection racket, with security forces who are involved in
sectarian fighting often taking bribes to have things operate. All of that
builds up pressure on prices.”

Mr. Maliki’s office has responded with proposals to spur foreign investment
and calls for public patience, even forgiveness. But billions in American
aid has already been spent on Iraq with limited impact.

Compared with security problems, which can be addressed to some extent by
deploying more troops to the streets, the economy is harder to control,
especially since most Iraqi commerce occurs beyond the reach of government

Fuel remains the country’s most visible example of economic dysfunction. A
gallon of gasoline cost as little as 4 cents in November. Now, after the
International Monetary Fund pushed the Oil Ministry to cut its subsidies,
the official price is about 67 cents.

The spike has come as a shock to Iraqis, who make only about $150 a month on
average — if they have jobs. Estimates of unemployment range from 40 to 60
percent. And with black-market sellers commanding $3.19 a gallon because of
shortages, up from about $1.25 a few months ago, the actual price most
Iraqis pay is far higher than what is officially sanctioned.

Filling up now requires several days’ pay, monastic patience or both.

Three years after fuel shortages led to riots in Basra, tension is often
palpable at the pumps. Lines stretch as far as the eye can see, and at least
two shootings have been reported in Baghdad this month alone. Near a station
downtown this week, bribes and line cutting appeared to be the norm. At one
point a Mercedes and several police vehicles cut ahead of at least 50 cars
while a policeman watched.

“Why are you letting people come from outside?” shouted a man who was just a
few cars from the station after seven hours of waiting.

The station’s manager said the drivers given special treatment must have had
a note showing that they were doctors, or attending a funeral. A few hundred
yards back, by a beat-up station wagon, Abdul Rehman Qasim had a different
theory: the drivers avoiding the wait possessed either money or power. He
had neither.

“I’m a poor guy,” he said. “So I leave some of my children here. They spend
the night in the car.”

“Under the government of Maliki, things are getting worse and worse,” he
added. “Only God can save us.”

In Iraq’s once-bustling markets, frustration is equally acute. Car bombers
have regularly attacked commercial districts, and prices seem to be up at
every stall. At markets in a middle-class Shiite area near downtown,
chickpeas have doubled in price. Lamb now runs as high as $2.75 a pound, up
from $1.50.

Cucumbers, tomatoes and eggplant have all jumped too, while the price of the
propane gas cylinders most families use for cooking has quintupled to more
than $15.

“We live hand to mouth,” said Mr. Dawood, a retired clerk for Pepsi.

Veiled women shopping nearby agreed. “We’re tired, and the situation is
horrible,” said Zakiya Abid Salman, 55, a widow carrying eggplants. “There
are no jobs, and the prices are always rising.”

Merchants said they had no choice but to increase prices because of the
increased costs of doing business. And still, they said, their incomes have

Ali Fouad, 27, pushing live fish around a shallow tub of water, said the
price of transporting his product from farms south of Baghdad has nearly
tripled since last year. A few months ago he sold about 110 pounds of fish a
day, earning roughly $50 after expenses. Since he had to raise prices about
60 percent, he said, he sells less and earns only $20 a day.

“What’s our life today?” he asked. “We are working only for gas, ice and
electricity. There is no savings.”

Stanching inflation will not be easy. Experts here say they struggle just to
collect the data necessary to diagnose the problem, while Iraq largely lacks
the usual mechanisms for controlling prices.

The Central Bank of Iraq is only three years old. Though the International
Monetary Fund reports that officials have raised interest rates — and
accelerated efforts to create a functioning market economy — its most recent
study in July also concluded that “the banking system is largely inert.” As
a result, the report said, the effectiveness of such measures would be “very

“Increasing the interest rate for business loans and mortgages — if people
aren’t taking out those loans, how much of an effect can you have?” said
Edward W. Kloth, an economic adviser at the American Embassy here. “The
tools that are available are very limited in this kind of a situation.”

Ali al-Dabagh, a spokesman for Prime Minister Maliki, said in an interview
that “the government is working hard to find solutions.” He blamed
terrorists for undermining Iraq’s elected leaders, but he acknowledged that
the country “needs an administrative revolution.”

For the families trying to survive, time sometimes seems to be running out.
Fathi Khalid, 43, a vegetable seller with a mostly empty stall, said
obstacles seemed to multiply by the day. Sometimes roads are blocked so
harvests never arrive. Sometimes he cannot afford to pay the right bribes.
And week after week, his customers purchase less and less.

“Most people buy half what they used to,” he said. “The vegetables sit here
and rot.”

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