Iraq's cabinet yesterday named a replacement for the central bank governor, Sinan Al Shabibi, after he was suspended for alleged financial impropriety.
Parliament voted to replace Mr Al Shabibi following an investigation by a special parliamentary committee into possible manipulation of the country's currency against the US dollar by the central bank.
"The cabinet decided to authorise Abdelbasset Turki, the head of the board of supreme audit, to run the central bank indefinitely," said Ali Al Moussawi, the prime minister's spokesperson.
"The parliament today made a unanimous decision to vote for Abdelbasset, who is already handling many financial governmental decisions including the country's fiscal budget," Mr Al Moussawi said. "Subsequently, a decision was made to remove powers from Mr Al Shabibi as central bank governor."
The chairman of the parliamentary integrity committee, Baha Al Araji, said its investigation was "not about money, but about procedures that led to the weakening of the dinar against the dollar".
Arrest warrants have been issued for 30 people, including Mr Al Shabibi and his deputy, Mudher Saleh, said Haider Al Abadi, a member of the investigating committee and the chairman of the parliamentary finance committee.
He said officials were trying to establish whether the actions of the officials were a reckless oversight or intentional.
"There was a huge pressure on the currency, with the difference between buying and selling increasing in the local market, affecting the mass public," said Mr Al Abadi.
Iraq's anti-corruption watchdog confirmed yesterday that it had launched an inquiry into the bank after it received the investigation report from the parliament.
In April, the central bank introduced new regulations to govern currency auctions after demand for US dollars ballooned amid suspicions that some of the cash was being smuggled to Iran and Syria.
In August, the US president Barack Obama banned Elaf Bank, based in Baghdad, from any dealings with the US banking system for allegedly functioning as a conduit to Iran.
Demand for dollars in the central bank's weekly currency auction doubled to US$300 million (Dh1.1 billion) from November to April, putting pressure on the nation's foreign reserves of about $60bn.
"The currency has returned to stability, but there needs to be more inquiries to see whether certain changes need to be done," said Mr Al Abadi.
Mr Al Shabibi was governor of the Iraq central bank since 2003. Before the Iraq War, he spent time in Geneva as a senior economist at the United Nations Conference on Trade and Development.
The central bank has until now been free from government interference and has been one of the most stable institutions in Iraq since the war ended.
Iyad Allawi, the leader of the opposition Iraqiya bloc, said the independence of the bank, which was necessary to maintain the exchange rate and prevent inflation, was threatened by the move against Mr Al Shabibi.
Magda Al Tamimi, a member of the parliamentary finance committee, agreed.
"The decision to issue a warrant for arrest against Sinan Al Shabibi and a number of officials at the central bank, was planned and ordered from some political forces," said Ms Al Tamimi.
"It is a political decision and not professional. Although we recognise the existence of some corruption cases in the bank, we are not happy and have reservations about this method, because of its impact on Iraq's reputation and the national economy."
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* With additional reporting by Nizar Latif in Baghdad and Agence France-Presse