Iraq's former PM, finance minister overruled central bank by devaluing Iraqi dinar: Wael Abdul Latif

Iraq's former PM, finance minister overruled central bank by devaluing Iraqi dinar: Wael Abdul Latif
Iraqi politician Wael Abdul Latif has told The New Arab that Iran-backed Shia parties are not willing to hold parliamentary elections this year.
6 min read
31 January, 2023
Hundreds of people demonstrated in front Iraq's Central Bank headquarters in Baghdad on Wednesday protesting against the recent decline of the Iraqi dinar's value in exchange of the US dollar. [Dana Taib Menmy/TNA]

During an exclusive interview with The New Arab, Iraqi politician Wael Abdul Latif said that the recent replacement of the Iraqi Central Bank's governor by Iraq's PM Mohammed Shia al-Sudani was "unconstitutional" and that Iraq's former PM Mustafa al-Kadhimi, as well as former finance minister Ali Allawi, overruled the country's central bank to decide to devalue the Iraqi dinar against the US dollar in late 2020. 

Wael Abdul Latif, 73, an Iraqi politician who served in several public posts since the 2003 illegal US-led invasion and occupation of Iraq, expressed scepticism on the current political, economic, security and social situation in the country during an exclusive interview with The New Arab at his home inside Baghdad's fortified Green Zone.

A Shia Muslim from the southern Basra Province, he holds a law degree and has served as a minister for provincial affairs in the Iraqi Interim Government in 2003. Soon after, he was appointed as governor of Basra and then a member of the Iraqi Governing Council from July 2003 until June 2004. He was also a committee member that drafted the Iraqi Constitution and was elected member of the Iraqi Council of Representatives in 2005.

He now heads the Dawla (State) Party, as well as the New Alliance for Political Alternative in Iraq - a licensed coalition of some political parties and nonpartisan figures, presenting themselves as an alternative to the current ruling elites in Iraq. 

This interview has been edited for brevity and clarity.

Wael Abdul Latif
Wael Abdul Latif, 73, is an Iraqi politician who served in several public posts since the illegal US-led invasion and occupation of Iraq in 2003.
[Dana Taib Menmy/TNA]

"The political situation in Iraq, similar to the other sectors including the economic, social, military, and educational institutions, is unstable. Unfortunately, the country is backtracking. When we started in 2003, the country was stable and the governing council has passed nearly 146 legislative orders," Abdul Latif said. "We are witnessing major regression in the legislative and executive authorities, even there is criticism against the judiciary authority."

He remarked on his pessimism about the economic situation facing the country and doesn't expect real solutions on the horizon "As the country which mainly relies on revenues from oil, and the other key sectors of agriculture, trade, industry, and investment have been largely neglected," he said. 

He also cautioned that major challenges are ahead for Iraq due to the economic situation. When TNA went to see him in the Green Zone, there were large demonstrations in front of the Iraqi Central Bank (ICB) in Baghdad, with demonstrators demanding the government and parliament revalue the Iraqi currency (dinar) in exchange for the US dollar. The dinar's slump has caused the prices of basic commodities to skyrocket since the country relies on imports for most basic goods. 

"Economy is the main platform for security and stability," Abdul Latif remarked. "When you deal with the crises of poverty and unemployment and achieve equality among people, this automatically ensures stability. But when you merely depend on oil - which suffers from corruption like other sectors - this is a looming warning of a very big danger ahead."

"Today, the price is US$84, after four months it might decline to US$50, then how can you deal with your economic affairs?" he stressed.

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Recently, Iraqi Prime Minister Mohammed Shia al-Sudani replaced Iraq's central bank governor following a weeks-long plunge of the Iraqi dinar. Sudani sacked Mustafa Ghaleb Mukheef, who was in the post since 2020 and replaced him with Ali al-Allaq, a former governor of ICB from 2014 to 2020.  

Abdul Latif described the move by Sudani as "unconstitutional".

"Today, Iraq lives in a dollar crisis. The ICB's governor has been sacked, and today there were demonstrations in front of the ICB. I think there is a big ignorance on this issue. The ICB works according to an administrative board that has immunity from punishments, the ICB governor is the head of the administration board, and he only announces decisions made by the board," he said. "According to the Iraqi binding laws, the Iraqi government is not allowed to interfere in the affairs, thus replacing Mukheef with al-Allaq by Sudani was unconstitutional and illegal."

Abdul Latif claimed that the dinar's deflation against the dollar is due to five Iraqi private banks smuggling hard currency out of the country and that Iraq was paying excessive amounts of dollars to neighbouring Iran to generate electricity. 

Iran is under US sanctions after former US president Donald Trump withdrew from the 2015 Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, in 2018. Ever since the two countries have so far failed to revive the deal. 

"US authorities have warned the Iraqi government that they will not let the dollar be smuggled into Iran. When the US wants to destabilise affairs in a certain country, it depends on the policy of withholding its currency, thus it can make big changes, as it made in Lebanon, Syria, Yemen, Turkey and Iran," the veteran Iraqi politician said.

"Iraq's dinar will soon decline as the Lebanese lira and Iranian rials if the Iraqi authorities soon not improve strategic relations with the Americans and impose a firm will on Iraq’s private banks which are all family banks," he added. 

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Iraq's central bank in December 2020 devalued the dinar, setting the exchange rate at 1,460 dinars per dollar amid an economic crisis caused by low oil prices and the Covid-19 crisis. Previously, the dollar was traded at 1,182 Iraqi dinars.

Abdul Latif noted that when he visited Iraq's central bank after the devaluation of the national currency and inquired why they devalued the dinar, the then governor of ICB told him they did not make the decision, but rather the former Iraqi finance minister Ali Abdul-Amir Allawi in agreement with Iraq's former PM Mustafa al-Kadhimi made the decision and guaranteed the salaries of the public sector for one year. 

Abdul Latif suggested that Iraq must reinforce its currency against the dollar and end the hard currency smuggling to the neighbouring countries.

"All calamities hit Iraq after 2003, including smuggling dollars, drugs trading and terrorism, come from our neighbours since some of the Iraqi politicians are aligned with different neighbouring countries. Thus, we need a unified method in dealing with our neighbours in which not allow any country to interfere in Iraq's internal affairs," he argued. 

In terms of whether he thinks provincial and parliamentary elections will take place this year in Iraq, the old politician predicts provincial elections to be held in the country by October. "They [the current ruling parties, mainly Iran-backed Shia groups] have accelerated provincial elections to be held in October so that parliamentary elections would not take place and Sudani's cabinet remains in power for the next three years and complete building their deep state," he alleged. 

Despite his pessimistic views on the situation in Iraq, Abdul Latif still said, "Iraq's future is for the independent and patriotic politicians. We have noticed that in the October 2021 general elections, people have added 2,250,000 votes to the independent lawmakers while the Sadrist Movement's bloc had won more than 800,0000 votes. This means that the independents could win more than 150 seats and form the government, but unfortunately, they are not one unified front. I think the Iraqi people are no longer willing to vote for the conventional parties that have ruled the country since 2003 and Iraq's political situation should be changed in the next stage."