Iraq Central Bank head suspended, Mubarak’s Laundromat
By Farah Halime, Rebel Economy
Nothing is more controversial in business and finance than banking, as we saw yesterday with the media storm that erupted after the departure of Vikram Pandit as chief executive of Citigroup.
But the most contentious of all are the central banks. These organisations are sitting at the juncture of both the economy and government.
On Tuesday we saw how controversial this industry can be when the governor of Iraq’s Central Bank was booted over allegations he had intentionally weakened the value of the Iraqi dinar against the US dollar.
“The cabinet decided to authorise Abdelbassit Turki, the head of the Board of Supreme Audit, to run the central bank indefinitely,” Prime Minister Nouri Al-Maliki’s spokesman Ali Mussawi said, adding that Sinan Al-Shabibi had been suspended from his post by the anti-corruption watchdog.
Iraq’s currency has been largely stable against the dollar for the past few years at around 1,200 dinars to the dollar, but concerns have been raised that currency auctions organised by the central bank were being used by neighbouring Iran and Syria to shore up foreign currency reserves, AP reported. The central bank has denied these allegations.
The delicate currency decisions at play in central banks is subject to such scrutiny that central banks appear forced to mislead the market.
Egypt’s central bank governor Farouk Al-Okdah has in the past insisted that the value of the Egyptian pound is determined according to the rules of the market, and neither the state nor the central bank would interfere by lowering its value, to the surprise of economists and market analysts who know otherwise (read: the Egyptian Central Bank heavily intervenes in the pound which is why it has only fallen about 5 per cent since the beginning of the revolution and not more).
The big post-revolution economy story yesterday was the delightful news from Switzerland that it has blocked nearly one billion Swiss francs ($1.07 billion) in stolen assets linked to dictators in four countries at the centre of the Arab Spring – Egypt, Libya, Syria and Tunisia, Reuters reported.
Swiss authorities are cooperating with judicial authorities in Tunisia and Egypt to speed restitution of the funds, but it is expected to take years, the report said. Here’s the zinger line for those closely monitoring Egypt: The bulk of the assets, nearly 700 million francs, are tied to former President Hosni Mubarak and his entourage. Now that is a reality check if you ever saw one. Of course money is tied up in land and other assets in Egypt (and his sons are a different story), but this frozen amount is nowhere near the $70 billion fortune critics claimed Mubarak was hiding. In fact, it’s pretty dismal considering he was bequeathed with the title of “Pharaoh” at one point. At best, Mubarak was running a very successful laundromat.
The hunt goes on for more of Egypt’s former regime allegedly linked to the complex web of corruption.
The Illicit Gains Authority on Tuesday detained business tycoon Ibrahim Kamel, member of the dissolved National Democratic Party, for 15 days pending investigation, Egypt Independent reports.
Kamel and his family are banned from travel and from disposing of their money. He is accused of amassing large fortunes illegally, though the details are sketchy.
The Illicit Gains Authority has been making almost weekly “arrests” or sending out warrants for arrest with little result so far. An insider at the IGA tells me that the organisation has not been able to retrieve a penny from corruption cases so far.
There is no doubt that the already drawn-out negotiations for an IMF loan are incredibly boring. But for the purposes of keeping you up to date:
Egypt hopes to reach a preliminary accord with the International Monetary Fund on its economic and social program by the end of the month, paving the way for a $4.8 billion loan, Finance Minister Momtaz El-Saieed told Bloomberg.
A far more interesting transaction is the fund Qatar is launching in Gaza to rebuild and modernise this part of Palestine.
Qatar yesterday launched a $254 million plan for Gaza, the biggest injection of reconstruction aid for the Palestinian enclave since it was devastated in an Israeli military offensive nearly four years ago, Reuters reported.
Rebel Economy is wary of Qatar’s financial decision-making and its seemingly endless supply of cash to support Egypt and other post-revolution countries, but Qatar’s track record in Palestine is positive.
Qatari Diar, the real estate arm of the Qatar Investment Authority has been working on Rawabi, a new city for Palestinian families
“Thanks Qatar. You have fulfilled the promise,” read a large billboard in Gaza city after the $254 million plan was announced
In an important announcement that reflects the trouble with implementing subsidy reform post-revolution, cash-strapped Morocco has budgeted subsidy spending on energy and staples next year close to its level this year in a move that may upset creditors and investors ahead of a maiden dollar sovereign bond, Reuters reported.
Even though the government has pledged to reform subsidies this year by restricting them to the neediest, this budget decision reflects a deeper problem with governments who want to scrap expensive energy subsidies but fear they will provoke riots if they do.
Rebel Economy wrote a piece on this dilemma last month. Here is an excerpt from the piece:
Regimes under pressure from tough economic conditions and high oil prices have pulled back from existing subsidy cut plans or shied away from new ones for fear of angering their newly emboldened population.
“After the Arab Spring [began], the efforts in some countries to reform some subsidies and to bring energy prices close to market values slowed down,” said Fatih Birol, chief economist at the International Energy Agency in Paris. “Global oil markets will get less oil because a significant proportion of that oil will be used at home, driven by artificially low prices.”
Farah is a business journalist and founder of Rebel Economy, a blog focused on how regional economies are rebuilding after the Arab Spring