Iraq’s cabinet named an interim central bank chief on Tuesday after the bank’s well-respected governor, who was on an overseas trip, was suspended amid a currency manipulation probe.
The move followed the announcement of an inquiry into allegations that officials at the Central Bank of Iraq (CBI) had intentionally weakened the value of the Iraqi dinar against the US dollar.
“The cabinet decided to authorise Abdelbassit Turki, the head of the Board of Supreme Audit, to run the central bank indefinitely,” Prime Minister Nuri al-Maliki’s spokesman Ali Mussawi said, adding that Sinan al-Shabibi had been suspended from his post by the anti-corruption watchdog.
Mussawi said the investigation had been launched because of “what happened with the dinar exchange rate with the dollar” and that a parliamentary report had blamed “the chief of the bank and several other people.”
“The Integrity Commission (anti-corruption watchdog), based on this report, decided to suspend Sinan al-Shabibi… The government, faced with this fact, decided to appoint someone who everyone agreed on, Abdelbassit Turki.”
Mussawi declined to comment on whether arrest warrants would be issued for any CBI officials, but Baha al-Araji, chairman of the parliamentary anti-corruption committee, said 30 warrants had been issued, including for Shabibi and his deputy, Mudher Saleh.
Araji said the investigation was “not about money, but about procedures that led to the weakening of the dinar against the dollar.”
The Integrity Commission confirmed earlier on Tuesday that it had recently opened an inquiry into the bank, after receiving the parliamentary report.
“I can confirm that we received the Central Bank dossier from the integrity committee in parliament,” said commission spokesman Hassan Aati.
“It is currently under investigation. The investigation has just started.”
Shabibi, who had been in Tokyo for a meeting of the International Monetary Fund, was now in Europe, Deputy Governor Mudher Saleh told AFP. He did not say in which country or when Shabibi was due to return.
Iraq’s currency has been largely stable against the dollar for the past few years at around 1,200 dinars to the greenback.
Concerns have been raised, however, that currency auctions organised by the central bank were being used by neighbouring Iran and Syria to shore up foreign currency reserves, allegations the central bank has denied.
It nevertheless tightened its rules on the purchase of dollars earlier this year, requiring banks to provide the identity of individuals or organisations buying them, as well as other information.
In 2010, the Iraqi central bank sold about $100 million per day, according to Saleh. That increased to between $150 and $160 million in the first 10 months of 2011 and reached around $200 million early this year, before peaking at $300 million.
Shabibi, 70, became CBI governor shortly after the 2003 US-led invasion that ousted Saddam Hussein. He obtained his PhD from Britain’s Bristol University, and wrote his doctoral thesis on managing industrialisation during times of uncertain oil prices.
In an interview with AFP in May, Shabibi acknowledged having disagreements with the government. He noted that there might be some within the government who wanted to use the central bank’s reserves for spending, but insisted that, on the whole, the bank had a “very good relationship” with the government.
“We have a very good relationship with the government. Not very good, but I mean, no central banker has good relations with the government. But we have relations… and we understand the concerns of the government,” he said.
“Of course sometimes we have very strong arguments.”
He said “there are of course people, some of them are in the government” who wanted to use central bank reserves rather than preserve them.
But “I think less and less people think of reserves as being a tool for development. Logic won, not me.”