New law governing the Central Bank of Iraq issued

Published March 9th, 2004 - 03:00 GMT

US civil administrator in Iraq Paul Bremer announced on Sunday the issuance of a new law governing the Central Bank of Iraq. The new law provides for an independent central bank whose objectives are to achieve and maintain domestic price stability and to foster and maintain a market-based financial system.

The Central Bank will develop and implement monetary policy, including exchange rate policy, reported a press release. It will also act as a fiscal agent of the Government of Iraq which entails issuing and redeeming the securities of the Ministry of Finance. Other responsibilities will be to license and supervise both state-owned and private commercial banks as well as other lending and money transmission companies; and operate an interbank payment system and supervise other payment systems.

The Central Bank is required to maintain its independence from the government. In particular, the Central Bank may not lend to the government and may establish and fund its own budget.

The new law provides for a Financial Services Tribunal which will be authorized to review certain actions of the Central Bank. It may review the Central Bank’s rejection of an application for a banking permit or the imposition of a fine by the Central Bank. The Tribunal is expected to develop special expertise in banking and financial matters. A dispute between banks or financial institutions may be referred to the Tribunal by written agreement.

The law has been reviewed by the Governing Council of Iraq, acting on the recommendation of its Economic and Finance Committee. The law has also been extensively reviewed by the International Monetary Fund and other international financial institutions.

The law is consistent with United Nations Security Council Resolution 1483, calling upon the Coalition Provisional Authority (CPA) to promote economic reconstruction and the conditions for sustainable development. The law is also consistent with the Report of the Secretary General to the Security Council concerning the need to transition from a centrally-planned economy to a market economy. — (menareport.com)