Stable exchange rates 'spoiled' Iraqi government: Ex-top banker

AFP, Friday 9 Nov 2012

Fugitive ex-chief of Iraq's central bank defends himself weeks after he was replaced as governor while overseas and warrants were issued for his arrest

The ex-chief of Iraq's central bank has dismissed charges against him as baseless in an interview with AFP and said authorities had compromised the bank's independence to access its reserves.

Sinan al-Shabibi said the government had been "spoiled" by a stable exchange rate for several years, and a warrant for his arrest for suspected mismanagement of the Central Bank of Iraq and currency manipulation had blown relatively minor foreign exchange fluctuations out of proportion.

Shabibi's remarks come weeks after he was replaced as governor while overseas and warrants were issued for his arrest and those of other bank officials in what diplomats and analysts have interpreted as a power grab by Prime Minister Nuri al-Maliki. The premier's office has insisted it was not behind the moves.

"Since 2009, they wanted to fire me, and they wanted money from the reserves," Shabibi said in a telephone interview from Geneva.

"I think the main problem... is basically the reserves, because they thought we have a lot of reserves, and they want to use it for financing."

He added: "The government wanted some money from the central bank... Of course, the law does not allow that, the central bank law.

"And of course, they say that there are differences in exchange rate policy. I don't think these differences require firing the central bank governor."

Asked if the warrants for him and other officials affected the bank's independence, Shabibi replied: "I'm sure, yes."

He declined to name any government official directly, but said: "They always have been talking about the fact that they should supervise the monetary policy, they should actually decide on many, many, many components of that policy, all these things."

The 70-year-old economist, who worked for two decades at the UN trade and investment body UNCTAD and had been central bank governor since 2003, has been described by analysts as a capable technocrat who fought to maintain the bank's independence.

But Iraq's cabinet decided last month to replace him with Abdelbassit Turki, the head of the Board of Supreme Audit, on an interim basis, after a parliamentary inquiry accused him and other bank officials of currency mismanagement.

Shabibi said he intended to return to Iraq to fight the charges, but would only do so if the arrest warrant was lifted. He noted that the government could not fire him, a power which by law rests with parliament.

He also dismissed the charges of currency manipulation or mismanagement as trumped up, comparing relatively minor fluctuations in the value of the Iraqi dinar to greater changes to the values of the US dollar or the euro.

"I told them (the government) the central bank was not the reason for this fluctuation, that it is part of the range," he said. "Eventually we succeeded in stabilising the exchange rate, only two or three percent difference.

"I told them, look, go to Europe now and see the difference."

He continued: "They were spoiled by the stability of the exchange rate (in recent years), and they used this against the central bank. They did not find any other faults, any problems. They said this is the problem, and they branded that as a failure of the central bank."

Shabibi said he did not know how long the proceedings against him would go on, saying only: "Let us wait and see."

Iraq's currency has been largely stable against the dollar for the past few years at around 1,200 dinars.

Along with the accusations over the fluctuation in the value of the dinar, concerns have been raised that currency auctions organised by the central bank have been 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.

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