Iraqi politicians accused of meddling in Central Bank auctions

Azzaman, May 6, 2013

A parliamentary commission has found that influential Iraqi politicians have been meddling in hard cash auctions the Central Bank has been organizing to stabilized the local currency, the dinar.

The Central Bank of Iraq has been holding auctions since 2004, selling an average of $180 million on a daily basis to halt the dinar’s decline vis-à-vis the dollar.

But despite the auctions, which have cost the treachery billions of dollars every month every month, the dinar has seen its value plummeting in the past few months.

“Some private and state-owned banks are being manipulated by traders and politicians to control auctions the Central Bank organizes,” said Majida Abdulatif, a commission’s member.

Abdulatif said the auctions were originally launched to stabilized Iraqi financial markets but have turned into a “destabilizing factor”.

She said the banks involved in auctions received millions of dollars but the hard cash was sold to the ‘wrong people.”

Under Central Bank rules, each Iraqi citizens is entitled to buy dollars from the auction, but in reality only foreign exchange houses and the banks themselves have been buying most of the hard cash.

Iraqis willing to travel are entitled to $5000 each at the official price from Iraqi banks.

Abdulatif said the banks receiving cash from the auction sold it to influential people and companies with links to senior government politicians or leaders of political factions.

She gave no names and declined to elaborate, but the auction’s failure to halt the dinar’s decline has raised doubts about transparency.

Despite the massive sums of hard cash sold by the central bank every day, the dinar is reported to have slumped to 1250 to the dollar from 1150.

In the past few months, and to stem the dinar’s slide, the bank started auctioning up to $200 million every day.

The dinar’s weakening vis-à-vis the dollar has also been blamed on economic sanctions members of the European Union, the U.S. and Canada have imposed on Syria and Iran, the countries with long borders with Iraq.

The demand for hard cash in Iraq mushroomed in the aftermath of sanctions.

Iran is currently one of Iraq’s major trading partners and trade with Syria, despite violence, has boomed in the past two years.