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By Michael Peel in Abu Dhabi
The suspension of Iraq’s central bank governor has triggered fears that economic stability could be undermined by what some see as a fresh power grab by Nouri al-Maliki, prime minister.
Sinan al-Shibibi, the ousted bank chief, played a critical role in giving Iraq a measure of exchange rate and monetary solidity while US troops withdrew, terrorist attacks increased and sanctions enveloped neighbouring Iran and Syria, business people and other observers of Iraq said.
The removal on Tuesday of Mr Shibibi, after almost 10 years in post, comes as Iraq’s political opposition and many independent analysts allege Mr Maliki is widening his control of crucial security and financial institutions .
“Maliki for a long time has wanted access to [dollar] reserves that Sinan was holding back to stabilise the [Iraqi] dinar,” said Toby Dodge, an Iraq specialist at the London School of Economics. “The authoritarian centralisation of power in Baghdad continues at a pace.”
Iraq’s cabinet suspended Mr Shibibi and appointed Abdul-Basit Turki, head of the Board of Supreme Audit, a public spending watchdog, to lead the bank until further notice, Mr Maliki’s office said.
It said the Integrity Commission, an anti-corruption body, had recommended the suspension after a parliamentary report had criticised the supervision of the foreign exchange auctions by Mr Shibibi and other central bank officials. Mr Maliki’s supporters have consistently denied that the prime minister either enjoys excessive powers or is seeking them.
Mr Shibibi, who is respected by many international observers of Iraq, could not immediately be reached for comment. Mudher Salih Kasim, deputy governor, said Mr Shabibi was out of the country. The deputy governor said he did not know whether reports of additional investigations into himself and a slew of other officials were true.
“For me, it’s uncertainty,” said Mr Kasim, who denied any impropriety. “It’s still not clear to me what we have done wrong.”
A business person in Iraq said the central bank developments had come as a “complete shock to everyone” and suggested a “much bigger game” was going on than the parliamentary exchange auction investigation.
He, like other observers, thought it revealing that the Maliki government had waited to make its move until the governor and other officials were out of the country for a trip focused on the just-concluded International Monetary Fund annual meeting in Tokyo.
One investor in Iraq, praising Mr Shibibi for doing a “massive job so far of stabilising the currency and keeping inflation down”, said it would be a “very bad signal” if the administration in Baghdad had removed him for political reasons. “There are few things that the current government doesn’t control – and one of them is the central bank,” the investor said.
The US embassy in Baghdad issued a guarded but pointed statement in which it said it supported “fair and transparent procedures” and “the independence of Iraq’s central bank, as enshrined in Iraqi law”. It added: “An independent central bank supports a stable currency, creates investor confidence and helps maintain macroeconomic stability”.
The action against the governor is ostensibly linked to longstanding allegations that buyers at the bank’s regular dollar auctions are using fraudulent papers, with some then deploying the currency in deals to evade sanctions on neighbouring Iran and Syria.
The central bank earlier this year tightened rules on customer identification for purchases of dollars, after demand at the regular currency auctions rose as high as between $400m and $450m a session – double the official target.
But analysts said it was unlikely the Iraqi administration – a Shia Muslim-led coalition – had moved against the bank because it was unhappy about the institution being a vehicle for sanctions breaches.
Although Mr Maliki’s government has historically had good relations with Washington, many observers say it is leaning increasingly towards the Shia-dominated government in Tehran, which is a strong ally of President Bashar al-Assad’s regime in Damascus.
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The suspension of Iraq’s central bank governor has triggered fears that economic stability could be undermined by what some see as a fresh power grab by Nouri al-Maliki, prime minister.
Sinan al-Shibibi, the ousted bank chief, played a critical role in giving Iraq a measure of exchange rate and monetary solidity while US troops withdrew, terrorist attacks increased and sanctions enveloped neighbouring Iran and Syria, business people and other observers of Iraq said.
The removal on Tuesday of Mr Shibibi, after almost 10 years in post, comes as Iraq’s political opposition and many independent analysts allege Mr Maliki is widening his control of crucial security and financial institutions .
“Maliki for a long time has wanted access to [dollar] reserves that Sinan was holding back to stabilise the [Iraqi] dinar,” said Toby Dodge, an Iraq specialist at the London School of Economics. “The authoritarian centralisation of power in Baghdad continues at a pace.”
Iraq’s cabinet suspended Mr Shibibi and appointed Abdul-Basit Turki, head of the Board of Supreme Audit, a public spending watchdog, to lead the bank until further notice, Mr Maliki’s office said.
It said the Integrity Commission, an anti-corruption body, had recommended the suspension after a parliamentary report had criticised the supervision of the foreign exchange auctions by Mr Shibibi and other central bank officials. Mr Maliki’s supporters have consistently denied that the prime minister either enjoys excessive powers or is seeking them.
Mr Shibibi, who is respected by many international observers of Iraq, could not immediately be reached for comment. Mudher Salih Kasim, deputy governor, said Mr Shabibi was out of the country. The deputy governor said he did not know whether reports of additional investigations into himself and a slew of other officials were true.
“For me, it’s uncertainty,” said Mr Kasim, who denied any impropriety. “It’s still not clear to me what we have done wrong.”
A business person in Iraq said the central bank developments had come as a “complete shock to everyone” and suggested a “much bigger game” was going on than the parliamentary exchange auction investigation.
He, like other observers, thought it revealing that the Maliki government had waited to make its move until the governor and other officials were out of the country for a trip focused on the just-concluded International Monetary Fund annual meeting in Tokyo.
One investor in Iraq, praising Mr Shibibi for doing a “massive job so far of stabilising the currency and keeping inflation down”, said it would be a “very bad signal” if the administration in Baghdad had removed him for political reasons. “There are few things that the current government doesn’t control – and one of them is the central bank,” the investor said.
The US embassy in Baghdad issued a guarded but pointed statement in which it said it supported “fair and transparent procedures” and “the independence of Iraq’s central bank, as enshrined in Iraqi law”. It added: “An independent central bank supports a stable currency, creates investor confidence and helps maintain macroeconomic stability”.
The action against the governor is ostensibly linked to longstanding allegations that buyers at the bank’s regular dollar auctions are using fraudulent papers, with some then deploying the currency in deals to evade sanctions on neighbouring Iran and Syria.
The central bank earlier this year tightened rules on customer identification for purchases of dollars, after demand at the regular currency auctions rose as high as between $400m and $450m a session – double the official target.
But analysts said it was unlikely the Iraqi administration – a Shia Muslim-led coalition – had moved against the bank because it was unhappy about the institution being a vehicle for sanctions breaches.
Although Mr Maliki’s government has historically had good relations with Washington, many observers say it is leaning increasingly towards the Shia-dominated government in Tehran, which is a strong ally of President Bashar al-Assad’s regime in Damascus.
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