Central Bank of Iraq

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The Central Bank of Iraq (CBI) was established on the 6 March 2004 on introduction of the Central Bank of Iraq Law. The bank's principal functions are to: maintain prices stability; implement monetary policy and exchange rate policies; manage foreign reserves; issue and manage the Iraqi currency; and regulate the banking sector.[1] The head office of the CBI is in Baghad and has four branches, located in Basra, Mosul, Sulaimaniyah and Erbil.[2]

In 2011 Iraq's Supreme Court ruled that the CBI and other previously independent bodies should be put under supervision of the Cabinet instead of parliament, a ruling which the Huffington Post reported as attracting criticism for putting the non-partisan nature of these institutions at risk.[3]

Further to this, In October 2012 an arrest warrant was issued by the Ministry of Interior for Sinan al-Shabibi, who had led the bank since its creation. The stated reason for the arrest were allegations of financial wrongdoing, but government critics see the charges as politically motivated and an attempt by those in power to sideline the politically independent economist[4] and to gain greater control over the $63 billion of reserves held by the bank. Toby Dodge, Iraq specialist at the London School of Economics (LSE), suggested that Prime Minister al-Maliki had "long wanted to access the dollar reserves that Sinan was holding back to stabilise the Iraqi dinar".[5] Abdul Baset Turki, head of the Supreme Audit Board, was named interim central bank governor after al-Shabibi's suspension.[6]

Role in management of oil revenues

From the 2003 occupation of Iraq to July 2011, the CBI had arrangements with the Federal Reserve Bank of New York (FRBNY) whereby the FRBNY maintained an oil proceeds account that received Iraqi oil sales revenues. Of these proceeds, 95 percent were assigned to the Development Fund for Iraq (DFI),[7] created by a United Nations' Security Council resolution in May 2003[8] and housed within the CBI. The remaining 5% was assigned to the United Nations Compensation Commission's fund account,[9] established in 1991 for Iraq to pay compensation for losses resulting from its invasion and occupation of Kuwait in 1990.[10]

During this period, an organisation called the International Advisory and Monitoring Board (IAMB) had oversight of the operations of the DFI. This included audit oversight, both over the control and reporting of oil export revenues, and over the use of revenues by the Iraqi ministries. On the 1 July 2011 oversight of the DFI was handed over to the Iraqi Committee of Financial Experts (COFE).[11] The United Nations Security Council welcomed the Iraqi federal government's assumption of oversight and full authority over its development fund at the same time that it underscored the importance of the Iraqi government ensuring that oil revenues are used in the interest of the country’s people.[12]

References

  1. "History of the CBI" Central Bank of Iraq, retrieved 25 November 2011.
  2. "History of the CBI" Central Bank of Iraq, retrieved 25 November 2011.
  3. "Sinan al-Shabibi, Iraqi Central Bank Chief, Issued Arrest Warrant Over Corruption Allegations" Huffington Post, 18 October 2012.
  4. "Sinan al-Shabibi, Iraqi Central Bank Chief, Issued Arrest Warrant Over Corruption Allegations" Huffington Post, 18 October 2012.
  5. "Iraqi central bank chief suspended" Financial Times, 17 October 2012.
  6. "Iraq Dismisses Central Bank Chief Amid Investigation" Wall Street Journal, 16 October 2012.
  7. "FSVC and Central Bank of Iraq Meet to Discuss New Central Bank HQ and Future Arrangements for Development Fund for Iraq" Financial Services Volunteer Corps, 14 June 2010.
  8. "Iraq: Transparency Snapshot" Revenue Watch Institute, retrieved 25 November 2011.
  9. "FSVC and Central Bank of Iraq Meet to Discuss New Central Bank HQ and Future Arrangements for Development Fund for Iraq" Financial Services Volunteer Corps, 14 June 2010.
  10. "Introduction" United Nations Compensation Commission, retrieved 25 November 2011.
  11. "IAMB Fund for Iraq: Press Release" Iraq Business News, 5 July 2011.
  12. "Security Council welcomes Iraq’s assumption of oversight over development fund" United Nations News Service, 30 June 2011.