Coalition Provisional Authority
Baghdad
Press Release
Strategic Communications
March 7, 2004 Contact: Victoria Whitford (whitfordv@orha.centcom.mil)
Sam Whitfield (whitfields@orha.centcom.mil)

New Law Governing the Central Bank of Iraq

Ambassador L. Paul Bremer, Administrator of the Coalition Provisional Authority, today announced 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 also has secondary objectives of promoting sustainable growth, employment, and prosperity in Iraq. The Central Bank will function as a modern central bank in line with current international best practices.

The Central Bank will develop and implement monetary policy, including exchange rate policy. It will also act as 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. For example, the Tribunal 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 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.

Also Available is a Fact Sheet on the New Central Bank Law.

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