BAGHDAD, Apr 3: When the United States introduced new 100 dollars notes, Saddam Hussein's governme.nt seized on the announcement- to give its embattled economy a boost, reports AP.

"American Cancels 100 dollars Bill," shouted the headline In the state-run Al-Jmhuriya newspaper, spreading panic among Iraqis who rely on the greenback as protection against hyperinflation.

One paper even ran a picture of an old 100 dollars note, with a big black "X" across it

Old dollars are still as valid as the new ones issued to foil counterfeiting, but in a rigidly controlled country where the government dictates the flow of information, the campaign was a huge success. Nervous Iraqis rushed to banks and biqck market money-changers to exchange dollars for previously shunned Iraqi dinars.

Saddam's government, desperate for hard currency due to tough UN sanctions, re-Celved an infusion of tens of millions of dollars, according to estimates by diplomats in ^he dinar, which hit a record low of 3,000 to the dollar in December, has' surged in value and is now relatively stable at around 700.

"Dealers in the hateful green currency are In mlbery." crowed Babll, a newspaper run by Saddam's son, Odai. "The dollarioun' (dollar people) were shocked by the revolt of the sleeping giant," the dinar.

Iraq remains one of the most troubled countries in the world. The Arab nation is an International pariah with no hope of rebuilding its wrecked economy until It can win a full lifting of the UN embargo, imposed in response to the 1990 invasion of Kuwait.

But Saddam has managed a few small victories lately to war off a total economic collapse that was looming only a few months ago. e

If Iraq agrees' td an oil-for-food deal with the United Nations when talks resume next Monday, it won't pull the country out of poverty. But it will put more bread oh the shelves, medicine in the pharmacies arid provide a psy-. chological lift for Iraq's 20 million people:

However, if the talks break down, the- country could again face an economic meltdown.

The United States, through the United Nations, will keep on finding obstacles to put in the way of the talks/ predicted Saad Jawad, a political science professor at Baghdad

* University.

Iraq's economic crisis came to a head In December as the Iraqi currency sank.by the day and year's inflation rate reached several thousand per cent.

Ori the streets of Baghdad, dirty, ragged children beg at traffic lights. In hospitals, there is an acute shortage of basic medicines.

About 4.500 Iraqi children die each month from a variety of illnesses, up from 600 a month before the Gulf War. according to the United Nations. Annual income for an average Iraqi has fallen from 3.400 dollars before the war to less than 1.000 dollars today..

The government claims that because of the oil-sale embargo. it does not have enough hard currency to buy tlje needed medicine.

In January. Saddam reluctantly agreed to consider the UN's long-standing offer to let Iraq sell a limited amount of oil to buy badly needed staples for its people. He also announced a string of austerity measures.

"We found that we needed to take very quick and drastic steps," said Finance Minister Hlkmat al-Azzawl.-who was appointed in December.

Among those measures was

a halt in the printing of the dinar in a bid to control inflation. That step also explains some of the Iraqi currency's rise against the dollar.

"We believed that the (UN) embargo was for the shortterm." al-Azzawi said. "But when it entered its sixth year, we, saw it as a time to review our policies."

The Iraqi ruler previously rejected the UN offer as a vio-

lation ot the country's sovereignty because the United Nations will monitor how the proceeds are spent.

Iraq would be allowed to sell one billion dollars worth of oil every 90 days. But perhaps half of the money will go for war reparations, covering expenses of UN programmes in Iraq and providing relief to the semi-autonomous Kurdish areas tn the north.

As a stopgap measure, the Iraqi government has released its strategic food reserves into state-run shops, driving down prices and leaving private shopkeepers no choice but to do tne same.

Food prices have fallen by half or more. Meat, for exam pie. has fallen to around 900 dinars a kilogram (about one dollar a pound) down from 5.000 dinars — a figure that represents a month's salary for an average Iraqi

But Iraq still faces long term problems

At the United Nations, the Americans maintain a hard line against Iraq and there's no prospect that the lull sanctions will be lifted anytime soon

UN weapons monitors are •till seeking proof to support Iraq s claim that it has de •troyed all its weapons of mass destruction.