BAGHDAD: The Iraqi Parliament on Monday voted to lift financial sanctions on banks in the Kurdish region after private and government financial institutions accepted the authority of the Iraqi Central Bank and federal laws on the banking sector and control of funds to and from Iraq, lawmakers told Arab News.
The Kurdistan Regional Government (KRG) held a controversial referendum on independence in late September. Baghdad responded by imposing a series of punitive measures including stopping financial transactions between banks in the region and the Iraqi provinces.
The fourth months’-long sanctions deepened the economic crisis that has plagued the region for almost three years and led to a growing recession in wholesale markets in Baghdad.
Monday’s resolution stated that “the need for the previous (punitive) measures related to transactions with financial institutions in the Kurdistan Region taken by the Parliament has disappeared after the goal concerning the banks was achieved.”
“The resolution (the sanction) was taken by the Parliament as a response to the referendum, but now the KRG has confirmed its commitment to the laws and regulations of the Central Bank and the federal laws of money-laundering and money flowing to and from the region,” said Massoud Haider, a Kurdish federal lawmaker and a member of the parliamentary finance committee.
“The members of the (parliamentary finance) committee are convinced that keeping the sanction will encourage the black market and open the doors for terrorism organizations to take advantage of these markets to transfer money,” Haider said.
The resolution also obligates the Central Bank to monitor private and government banks operating in the region and deliver a monthly report to the parliamentary finance committee showing the level of commitment of these banks to federal laws and instructions of the Central Bank.
Baghdad has demanded the imposition of the authority of federal authorities in the region to ease the sanctions imposed since early October. Five joint technical committees were formed to agree on all pending issues between the two sides, including on oil, borders and airports, and to discuss mechanisms to impose the authority of the federal authorities on the region for the first time since 2003.
Kurdish lawmakers and finance experts told Arab News that the sanctions imposed by Baghdad had deeply affected the economy in the Kurdish region, paralyzed business transactions and stopped investment.
The parliamentary resolution will reduce pressure on the Kurdish region, which has been suffering from a serious shortage of funds due to the inability of the KRG to pay the salaries of government employees for more than two years because of financial and administrative corruption and the acquisition by a few families of oil and border crossings revenues.
“The resolution is bold and shows a breakthrough in relations between the KRG and Baghdad and will positively reflect on the economy in Kurdistan and Baghdad,” Bassim Antwan, an Iraqi finance expert, told Arab News.
“The sanctions have deeply impacted the economy in the region and caused huge money losses to private companies and people who invest in Kurdistan, and affected the prices of the real estate.
“Also, the economic recession which engulfed Kurdistan before the sanctions and intensified after that has extended to impact the wholesale markets in Baghdad and other provinces, and this resolution will revive these markets in hours,” Antwan said.