Wednesday,19 December, 2018
Current issue | Issue 1121, 8-14 November
Wednesday,19 December, 2018
Issue 1121, 8-14 November

Ahram Weekly

Controlling the money

By dismissing the chief of the Iraqi Central Bank, Iraqi Prime Minister Nuri Al-Maliki is continuing his attempts at centralising power, writes Salah Nasrawi

Al-Ahram Weekly

The shock ouster of the governor of the Central Bank of Iraq and the issuing of arrest warrants for him and for many of his staff have triggered concerns about widespread corruption in Iraq’s financial and monetary sectors, including fraud, currency manipulation and money laundering.
However, the brazen removal of Sinan Al-Shibibi, a well-known economist who worked for the United Nations for nearly two decades, has also displayed Iraqi Prime Minister Nuri Al-Maliki’s determination to consolidate power by moving to control the country’s vast oil revenues.
Al-Maliki’s government announced on 16 October that it had fired Al-Shibibi, who has held the job for more than nine years, following a probe into the bank’s activities. He was replaced temporarily by Abdel-Basit Turki, head of the Supreme Audit Board.
Ali Al-Moussawi, a spokesman for Al-Maliki, said that the dismissal had come after a parliamentary investigation had disclosed “shortcomings” by the Central Bank’s governor and other staff.
He said that the parliamentary panel had submitted its report to the official Integrity Commission responsible for combating corruption, which in turn had decided to act against Al-Shibibi and nearly two dozen of his staff.
Under a system forged by the previous US occupation authority, the Central Bank started channelling millions of dollars a day through the country’s state banks in order for them to sell to Iraqis importing goods from abroad or planning to travel overseas.
The system is widely seen as being behind a growth in corruption owing to lax regulation and the manipulation of variations in prices between local and foreign currencies. The bank currently sells the dollar for 1,166 dinars, while the market price is around 1,210 dinars.
On Monday, Dananer, an online economic news agency, quoted Haitham Al-Jibouri, an Iraqi lawmaker and member of the parliamentary committee that had investigated the bank, as saying that the panel had found that some $40 billion had been made available by the Bank to traders last year without proper documentation.
Last month a US government watchdog said it believed that as much as $800 million in US dollars was being sent out of Iraq illegally each week, draining the country of hard currency.
The US Office of the Special Inspector-General for Iraqi Reconstruction said in a report that auditors in Baghdad feared that up to 80 per cent of an estimated $1billion leaving the country weekly lacked proper documentation.
This is a huge amount of money, and if the reports are true they indicate an organised system of corruption within Iraq’s monetary and financial bodies.
Before being named to manage the Iraqi Central Bank by the US occupying administration shortly after the US-led invasion of Iraq in 2003, Al-Shibibi worked for the Geneva-based United Nations Conference on Trade and Development.
Al-Shibibi, who is politically independent, comes from a respected Iraqi Shia family, and during the rule of former president Saddam Hussein he spent nearly three decades in exile.
Al-Shibibi, who is currently out of the country, has rejected the accusations made against him and has promised to return to Iraq to face the charges. Many who know him have come to his defense, arguing that he is the victim of a political conspiracy.
Relations between Al-Maliki and Al-Shibibi have been tense for years, and in recent months speculation has arisen that Al-Maliki has been planning to get rid of him and many of his trusted aides. Suspicions now abound that the recent Central Bank affair is an attempt by Al-Maliki to tighten his control of the bank.
Under the current Iraqi constitution, the Central Bank is an independent body and its governor is only answerable to parliament. A law enacted by the American occupation administration in 2004 also gives the governor immunity from prosecution in cases related to the bank’s activities.
Some commentators have suggested that the government’s decision to remove Al-Shibibi is illegal. “It is null and void, because it lacks constitutional and legal foundations,” wrote Wael Abdel-Latif, a former judge and lawmaker on the Sahat Al-Tahreer news website. 
In January of last year, Al-Maliki secured a ruling from Iraq’s high court placing the Central Bank under the authority of the cabinet rather than the parliament, attributing the decision to the predominantly executive nature of the bank’s activities. Many believe that the recent ouster of Al-Shibibi was motivated by Al-Maliki’s desire to exercise more control over the bank’s reserves, which are estimated to reach some $60 billion this year.
The Iraqi media have reported that Al-Maliki sought the overthrow of Al-Shibibi after the latter refused a request from the government to borrow from the financial reserves to cover its expenses.
Al-Shibibi reportedly rejected the government’s desire to draw from the Iraqi currency reserves, as this could decrease the value of the Iraqi currency.
The Central Bank has reportedly also ruled out the revaluation of the dinar by knocking three zeros off the nominal value of banknotes.
While the government wants the measure in order to simplify financial transactions and improve confidence in the dinar and thus eventually boost its value, the bank has been urging caution, saying that the economic climate is not suitable for redenomination.
Analysts believe that behind the arm-twisting from Al-Maliki and his attempt to control the Central Bank stands Iran’s attempts to ease the economic sanctions imposed on the country by the West because of its nuclear programme.
The Iraqi newspaper Azzaman reported on 17 October that the Iranian lobby in Iraq had been responsible for toppling Al-Shibibi. It said that Iraq’s Central Bank had recently limited Iran’s ability to draw hundreds of millions of dollars from the Iraqi market in order to support its economy at the expense of the value of the Iraqi dinar.
The paper quoted unidentified sources as saying that Al-Shibibi and his deputy, Mudhir Saleh, had launched a series of measures binding those who wish to exchange Iranian currency for US dollars to submit their applications to the Bank.
The move was aimed at ensuring that such amounts were used for commercial transactions and were not being smuggled into Iran, which suffers from a significant lack of hard currency.
The Iraqi dinar has also been a casualty of the Syrian crisis, due to the demand for dollars in the country’s sanctions-hit western neighbour. Al-Maliki, who looks at the potential fall of Syrian President Bashar Al-Assad as a development that might strengthen his Sunni Arab and Kurdish rivals in the region, has been appearing to support Al-Assad in terms of coordination and financial and commercial assistance.
While it is hard to accuse Al-Shibibi of being single-handedly responsible for the problems that have hit Iraq’s Central Bank, it is surprising that he has remained in the job for more than nine years despite the rampant corruption in the Iraqi establishment.
Whether Al-Maliki is taking aim at Al-Shibibi or not, Iraqi politics, surreal as it can be, is being further crushed by the weight of the Central Bank scandal.

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