MAY 23, 2003
The Philadelphia Inquirer
BAGHDAD — In one of Baghdad’s most dangerous neighborhoods, in the center of a congested marketplace lined with food stalls and shoeshine boys, more than 100 men clustered together, shouting out numbers.
Blocks of Iraqi dinars wrapped in dirty rubber bands changed hands; thousands of U.S. dollars were waved in the air. It was hot, dirty and chaotic, with boys pushing through the crowd to sell cold drinks, cars honking as they inched along the narrow road, and traders carrying loaded weapons and looking warily at strangers.
Far from Wall Street but just as influential here, this is al Kefaah – the place where the value of the American dollar is determined each day. Lately, it has had quite a ride: On May 1, one dollar equaled 2,000 dinars. On Tuesday, it was worth about 1,300. At one point, on May 16, its value had dipped to 1,000.
Farid J. al-Diliny, an assistant professor at the University of Baghdad’s College of Administration and Economics, said that he believed the dollar’s value had been inflated before the war, and that its future relationship with the dinar would be complicated.
No one is sure what direction the Iraqi economy will take, Diliny said. Some Iraqis are reluctant to have too many dinars because any new government will print its own currency, and no one knows how easy it will be to swap the old dinars for new ones.
One reason the dollar is losing ground, Diliny said, is the flood of bills pouring into the country as the U.S. military pays the Iraqi workers it has hired in American currency.
“Most of my customers are Iraqis who are paid in dollars,” said Ali Iessa, the owner of the Fas Monetary Exchange near the center of Baghdad. “People are afraid of the price of dollars, so they are exchanging every day before it gets to 100 dinars.”
No one knows when the ride will stop. As U.S.-led forces struggle to restore even basic services, they also need to reform the monetary system, whose 250-dinar note still bears Saddam Hussein’s face.
“We don’t have a clear vision now of the future Iraq economy,” Diliny said. “With so many problems, things are moving slowly.”
As in all money markets, speculation can drive prices. Whispers that much of the money looted from Iraqi banks was marked and that U.S. soldiers were burning bundles of dinars sent the market into a frenzy.
But according to the traders of al Kefaah, the powerful merchants who control the market are at least as important to the value of the dollar.
“They can affect the market by pumping a lot of dollars into it and bringing the price down or buying a lot and bringing it up,” agreed Sabah M. al-Najjar, the head of the University of Baghdad’s industrial-management program.
The dynamic market has caused currency trading to explode. New merchants say the business is easy to launch and easy to manipulate.
Fauzee Suood and his brother-in-law, Firaas Mohammed, set up shop beneath an oversize umbrella in the traffic circle around Paradise Square last month. Now theirs is one of a dozen such businesses there.
Suood said the two were partners in an auto-parts shop before the war, but there is no demand for auto parts now. So they switched to currency trading, he said, because “it’s the easiest way to make money,” requiring no more than a bag of cash, a calculator, and a scale to weigh bundles of dinars.
The downside is that it’s a seriously risky business. Most men who work in the markets are armed. Some exchange merchants, among them Omer Abd al-Mugeth, have gone even further to protect themselves.
Owner of Taima’a Exchange in the Karadaa Kharege neighborhood, Mugeth handles $10,000 to $100,000 daily. He keeps a handgun tucked in his waistband and recently, he said, hired a sharpshooter to keep a rifle trained on his shop.
When his listeners seemed skeptical, he pointed to the four-story building across the street. The ground-floor store was closed, and curtains shrouded the six sets of glass doors on the floors above.
But on closer look, it was clear that one door on the third floor was slightly ajar, its white curtain gently stirring. Then a hand popped out, and waved.
“I need security,” Mugeth said.