Iraqi PM replaces Central Bank governor over currency drop

Jan 23, 2023, 12:40 AM | Updated: 10:30 am

BAGHDAD (AP) — Iraq’s prime minister on Monday replaced the governor of the country’s Central Bank following a weekslong plunge of the Iraqi dinar, the state news agency reported.

Prime Minister Mohammed Shia al-Sudani made the move after the governor, Mustafa Ghaleb Mukheef, told him he no longer wishes to stay in the job, the Iraqi News Agency said. Mukheef, who was in the post since 2020, was replaced by Muhsen al-Allaq, the agency added.

Al-Allaq, a former central bank governor, was named “acting governor,” an indication it could be a temporary posting.

The dinar hit new lows on Friday, reaching about 1,670 to the dollar. The currency has lost nearly 7% of its value since mid-November. The official rate stands at 1,470 dinars to the dollar.

The drop in the past two months has affected markets in the oil-rich but corruption-plagued Iraq, where many are seeing their purchasing power take a hit.

Speaking at the launch of a food assistance program for vulnerable households, Sudani called the recent fluctuations in the currency a “temporary issue of trading and speculation” and promised to “apply the proper standards to protect public money and prevent smuggling, money laundering, and speculation.”

The drop in the dinar comes at a time when Iraq’s foreign currency reserves are standing at a record high of around $100 billion.

Some Iran-backed politicians in Iraq have blamed the drop on recent measures by the U.S. Treasury. The United States has sanctioned several Iraqi banks dealing mainly with Iran, which is under Americans sanctions, amid concerns that hard currency is being routed from Iraq to Iran.

The U.S. has significant control over Iraq’s supply of dollars as Iraq’s foreign reserves are held at the U.S. Federal Reserve. Late last year, the Federal Reserve began imposing stricter measures on transactions, which have slowed the flow of dollars into Iraq, including blacklisting a number of banks from the dollar market over suspected money laundering.

The moves came after auditors in Iraq late last year uncovered a massive scheme in which a network of businesses and officials allegedly embezzled some $2.5 billion from the country’s tax authority.

In nearby Lebanon, mired in the worst economic crisis in its modern history, five European countries are probing the embattled central bank governor, Riad Salameh, on allegations of laundering public money in Europe. Switzerland first opened a probe two years ago, followed by France, Germany, Luxembourg, and Liechtenstein.

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Iraqi PM replaces Central Bank governor over currency drop