Last week the federal supreme court ruled in favor of the government’s request to have the Central Bank of Iraq (CBI), along with the Independent High Electoral Commission, the Integrity Commission, and the High Commission for Human Rights, put under the supervision of the cabinet. This is bad news for the central bank.

Up to now, the CBI has been under the supervision of the parliament, as stipulated by the constitution. There is a good reason for this. Under the parliament, the central bank is not answerable to any single politician. Under the cabinet, it could potentially be directly controlled by one man.

A dangerous opportunity has been created for the government to increase the money supply arbitrarily. Saddam Hussein tried this during the 1990s. The result was hyperinflation.

Iraq’s US$ 50 billion in forex reserves are also at risk. There will be a big temptation to use these for local patronage projects with foreign currency-denominated expenses. If this happens, the CBI could be saddled with significant losses. It could even end up having to be recapitalized.

The court’s ruling is great news for anyone who might some day be in a position to “wet his beak” at the CBI’s expense. Bad news for everyone else.

Following the Supreme Court decision to place several independent bodies under the control of the Iraqi cabinet, rather than the parliament, a legal expert has said that the Central Bank of Iraq is an independent body that cannot be linked to the Cabinet.

According to the report from AKnews, the Central Bank of Iraq warned that its foreign assets would be confiscated by Iraq’s creditors if it was answerable to the government instead of the parliament.

Legal expert, Hassan Shaaban, the General Coordinator of Human Rights and Democracy Assembly in Iraq, told the news agency that the Central Bank of Iraq should not be under the supervision of the Council of Ministers because it is a board that should be managed professionally, independently and without any link to the government.

Contrary to other reports, Shaaban believes that the Central Bank has the right to object and appeal.

The central bank said in a statement issued today that its independence under Iraqi law was still the only thing that guaranteed that its financial resources abroad would not to be confiscated by the country’s international creditors.

(Source: AKnews)

Iraqi Prime Minister Nouri al-Maliki has won a court ruling placing independent bodies like the central bank and the electoral agency under the control of the cabinet, rather than the parliament, a centralization of power that critics are calling a “coup.”

Maliki’s government made the request to the supreme court in December before he was reappointed later that month to a second term, and the court ruling in his favor came through last Tuesday, generating little controversy at first, reports Reuters.

According to the constitution, hastily drawn up in the aftermath of the 2003 U.S.-led invasion, the independent agencies affected are supposed to be monitored by parliament .

The Supreme Court agreed with Maliki that, where the language describing parliament’s monitoring powers over the agencies was ambiguous, the bodies should be attached to the cabinet.

The main agencies affected are the Central Bank of Iraq, the Independent Higher Electoral Commission, anti-corruption watchdog the Integrity Commission and the High Commission for Human Rights.

“The court views that the term ‘monitoring by’ is not clear enough to place these under parliament’s authority, therefore they should be attached to the cabinet,” the ruling said.

The decision alarmed critics who view with suspicion glimpses of authoritarian leanings in some of Maliki’s actions.

Emirates newspaper The National quotes Leyla Khafaji, an MP with the National Alliance (part of the coalition that Mr al Maliki heads), as saying “It’s a coup. How can you have a working democracy if the institutions monitoring the government are under government control?

“From this moment onwards, we cannot know if elections will be fair and independent, and if the integrity commission answers to the government, how will it fight the legions of corruption that stand behind that government?”

From the Sunni-backed Iraqiya bloc, MP Haider al-Mulla said “We consider the request of Nuri al-Maliki to the court to be a coup against the constitution that puts Iraq’s democracy on the line”.

Legal experts and analysts decried the supreme court decision, which a judicial spokesman said could not be appealed.

“Prime Minister Nuri al-Maliki is seeking more powers to control his government. He wants to have a strong government,” said a prominent lawyer, Tariq Harb.

Amman-based researcher Yahya al-Kubaisy, of the Iraqi Center For Strategic Studies, called it an “unforgiveable mistake.”

“It’s a clear bid by Maliki to monopolize powers,” he said.

(Sources: Reuters, The National, AKnews)

The Central Bank of Iraq (CBI) stated on Thursday that the assumed value of taxs in the 2011 budget is amounted to 2.7 trillion Iraqi dinars, that is 3% of the state budget.

Muzher Mouhammed Saleh, the adviser of the ICB, told AKnews that the tax file is semi-disabled in Iraq due to the poor performance of tax planning services, and because of citizens avoiding paying tax.

He said that if the Iraqi Finance Ministry wanted to activate the tax for the Iraqi people, then it should carry out educational and awareness operations about the importance of taxes in the re-construction of the country as an important financial resource for the government to finance its economic needs.

The tax sector in Iraq was semi-disabled in recent years because of the economic and security situations in the country that led to limiting the tax system to the sector of employees and traders only.

(Source: AKnews)

The Turkish alBaraka Bank will open its branch in Erbil, the Kurdistan Region’s capital, in early January, according to a report from AKnews.

According to the information leaked to the agency’s correspondent, the bank’s officials have completed the formal application through the Central Bank of Iraq (CBI), and have informed the Kurdistan officials of the CBI’s approval.

The Turkish İş, Vakıfbank and Ziraat Banks are also preparing to open branches in Erbil in 2011.

(Source: AKnews)

An adviser to the Iraqi Central Bank said on Wednesday that the 2011 budget will result in economic growth of 10%.

Muzher Mohammed told AKnews that the 2011 budget in its present state is one of the best Iraqi budgets since 2003 as it will increase the country’s economic output by 10%, and it will also address part of the economic difference between Iraq and the rest of the world.

The Iraqi Ministers Council said in a statement last Wednesday that it had approved on 2011 draft budget with a deficit of $12 billion that will be covered by the amounts retained from the previous year’s budget and internal and external loans, and it showed that the expected income is estimated by $66.7 billion, with expenditures of $78.7 billion — a deficit of $ 12 billion.

(Source: AKnews)

With the stated aim of contributing to the reform of the Iraqi banking sector, the Central Bank of Egypt (CBE)’s Banking Institute has begun training employees of Iraq’s central bank in modern methods of banking and finance, administration and human resources.

According to Banking Institute Executive Director, Hala al-Said, the move comes within the context of the World Bank’s strategy of supporting the Iraqi banking industry in conjunction with the Egyptian government’s desire to participate in the war-torn country’s reconstruction, particularly in the areas of finance and economics.

Al-Said explained that the first training course — devoted to the issue of banking supervision — had more than 100 Iraqi trainees. The institute will also begin a human resource management course in December for 20 Iraqi trainees.

(Source: Al-Masry Al-Youm)

The Central Bank of Iraq (CBI) said on Friday that the performance of private banks is better than the performance of state-owned banks, indicating that the lack of restrictions and bureaucracy in private banks gave them a competitive advantage.

Muzher Mouhammed Saleh, the chancellor of the CBI, told AKnews:

“The future in Iraq will be for the banking transactions of private banks to be free from governmental red-tape.

“Investment companies and businessmen don’t have fears when depositing their money in private banks ….  The increasing number of private banks in Iraq shows the recovery of the economy and liberation from old banking restrictions.”

The Iraqi Finance Ministry decided on May 19 to form a committee to develop and organize the work of private banks in the country, because of fears of businessmen and investors to deposit funds in these banks.

The total capital of Iraq’s private banks is now $1.6 billion [1.9 trillion Iraqi dinars], up from $30 million in 2004.

There are now 31 private banks throughout Iraq, with more than 600 branches, and they compete in their number and quality of services with branches of the state-owned Rafidain and Rashid banks.

(Source: AKnews)