Iraqi battlefront: Prices
By Damien Cave
Copyright by The New York Times
Published: August 25, 2006
BAGHDAD For Mehdi Dawood, Iraq's failures have leeched into the cucumbers. A few months ago, he paid about $1.70 for a week's worth of the seedy staple. Prices have since doubled, so if he shopped like he used to, cucumbers would devour a fifth of his monthly pension.
It's not just the vegetables. Fuel and electricity prices are up more than 270 percent over last year, 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 without?
"Meat, I just don't buy it anymore," said 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."
Even as violence rages here, disgust is rising like bile among Iraqis who cite a failing economy as their most pressing concern. Three months into the administration of Prime Minister Nuri Kamal al-Maliki, the inflation rate has reached 70 percent, up from 32 percent last year.
Wages meanwhile are flat, banks are barely functioning and the consensus among many U.S. and Iraqi officials is that inflation will likely accelerate.
The causes, nearly all agree, are numerous. Violence, corruption and the fallout from decades of state control are kicking up the price of nearly everything, especially fuel, which in turn multiplies the production cost for goods already on the rise.
"It's a very serious problem," said Anthony 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."
Maliki's office has responded with proposals to spur foreign investment and calls for public patience, even forgiveness. But billions in American aid have been spent on Iraq with limited impact. Unlike the security situation, which can be addressed by deploying more troops to the streets, economies are mercurial, especially in a country where buying and selling typically occur beyond the reach of government policy.
Fuel remains Iraq's most visible example of economic dysfunction. A gallon of gasoline cost as little as 4 cents in November 2005; 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 even have a job. Estimates of unemployment range from 40 to 60 percent. 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. Gas 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 in the city center 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.
The station's manager said the drivers given special treatment must have had a note showing they were doctors, or attending a funeral. 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 targeted commercial districts, and prices seem to be up at every stall. In one of city's oldest markets, in a middle-class Shiite area near downtown, chick peas have doubled in price. Lamb now runs as high as $2.75 a pound, up from $1.50.
Prices for cucumbers, tomatoes, eggplant, have all jumped too, while the price of the propane gas cylinders most families use for cooking have quintupled to more than $15 each.
"We live hand to mouth," said 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 what they charge because of the increased cost of doing business. Still, they said, their incomes declined. 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 49 kilograms, or 110 pounds, of fish a day, earning roughly $50 after expenses. Since he had to raise prices about 60 percent, he said he sells fewer fish and earns only $20 a day.
"What's our life today?" he asked. "We are working only for gas, ice and electricity. There are no savings."
From Basra in the south to the rural areas of Iraqi Kurdistan, considered the most stable part of the country, rampant inflation is stirring discontent. Kurds regularly complain that the prices on virtually all the basic needs of life have shot up in the past year. Salaries have not kept pace.
"Inflation now is very bad," said Lieutenant Ismail Ibrahim Said, a police officer in Qaradagh, a town in Kurdistan. "The salary we get is nothing for us. It's only $220 a month. If a child gets sick, we can't take him to a clinic for treatment. We can't buy new clothes. The salary is enough only for food."
Stanching inflation will be not be easy. Experts here say they struggle just to collect the data necessary to diagnose the problem, while Iraq largely lacks the usual economic mechanisms for controlling prices.
The Central Bank of Iraq is only 3 years old. Though the International Monetary Fund reports that officials have raised interest rates to reduce liquidity - and accelerated efforts to create a functioning free market - 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 proposals would be "very limited."
Ali al-Dabagh, a spokesman for the prime minister, said in an interview that "the government is working hard to find solutions." He blamed terrorists for undermining Iraq's democratically 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 except for a few dozen cucumbers, said that obstacles seem to multiply by the day. Sometimes roads are blocked so harvests never arrive. Sometimes he cannot afford to pay the right bribes. 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."