Institute for War and Peace Reporting | Giving Voice, Driving Change

Currency Headaches

As the deadline for exchanging old banknotes for new nears, Iraqis have found it harder – and costlier – to get hold of the new money.
By Naser Kadhem

Few Iraqis will miss the currency they used in the days of Saddam Hussein, but the changeover now taking place has still caused a lot of head-scratching – not to mention a little trouble of its own.

Hyperinflation brought about by United Nations sanctions meant that the old 250-dinar notes were worth only about 15 US cents each, making even the simplest transaction a painful exercise in thumbing through reams of paper.

But Iraq’s new currency – even though it is printed on high-quality paper and comes in a range of useful denominations – has already caused enough problems to make Iraqis yearn for their tattered wads of the old light-blue bills.

Iraq's Interim Governing Council issued the new currency on October 15 last year, giving Iraqis until January 15, 2004 to exchange their old notes for new ones ranging in value from 50 to 25,000 dinars.

The transition – like many other changes in post-war Iraq – has bred disorder, frustration, and accusations of profiteering and cronyism.

The currency changeover has even led to a fatal car accident. A taxi on the Mosul-Baghdad highway went off the road and rolled over, killing four people, when the driver and his passengers got into a fight over change. "I quarrelled with someone sitting behind me in the car because I refuse to accept the old currency," said driver Ahmed Kamal.

Merchants have been demanding new bills for purchases, even as they give their own old notes as change for hapless customers.

Imad Muhammed, owner of a grocery store in the town of al-Dijail north of Baghdad, defended the practice, saying he had no choice but to force his customers to pay in the new currency since his wholesale suppliers refused the old denominations.

But business has suffered as a result, he says, “A week ago I couldn't sell anything. I used to do 200,000 dinars [about 130 dollars] in sales daily, but now I can't even sell 10,000 dinars’ worth of goods.”

Elsewhere, as the deadline ticked down to the changeover, banks throughout the country filled with crowds of impatient citizens with shopping bags full of the old currency, jostling over their places in the queue.

Once they secure a place in the line, Iraqis say they often wait for hours, only to be told by the tellers that the bank has run out of the new currency. “I spend all my day in banks,” said businessman Haydar Mahdi. “However, the employees change the currency for just a few people and leave the others waiting, because they exchange only for their relatives and friends.”

Oddly enough, there always seem to be plenty of people with a supply of the new currency, which they are willing to trade for old notes – at a slight mark-up, of course.

And the rates of exchange spiralled as the deadline approached. While 25,000 dinars in new currency once cost 25,500 of the old money, the rate soared to 28,000 as the deadline neared.

Iraqis are still prepared to see the funny side of every new situation, and they compare today’s currency crunch with the earlier shortages of petrol. Last year, drivers would wait hours to buy petrol at subsidised prices, while black marketeers swarmed the kerbsides outside filling stations offering supplies at 10 times the official rate or more.

The new joke now making the rounds is that experience counts – people who used to queue for hours in their cars at petrol stations now spend the time waiting in line at the bank.

Naser Kadhem is an IWPR trainee journalist in Baghdad.

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