Iraqi finance minister sacked, risking economic fallout

By Saif Hameed and Ahmed Rasheed

BAGHDAD (Reuters) - Iraq's parliament sacked Finance Minister Hoshiyar Zebari on Wednesday over corruption allegations, a move that risks further destabilizing the major OPEC producer's fragile economy as it struggles with a massive budget deficit.

Zebari lost a no-confidence vote by 158 to 77, two lawmakers said, after questioning in parliament last month over alleged corruption and misuse of public funds, which he denies.

Zebari, a prominent Kurdish figure who had served as Iraq's foreign minister for more than a decade, has recently led high-level negotiations for a loan with the International Monetary Fund (IMF) and with international lenders for a Eurobond.

Iraq's economy, which relies almost exclusively on oil revenue, has been battered by a drop in crude prices and the costs associated with the war against Islamic State, which seized a third of the country in 2014.

Falling revenues have caused the public deficit to widen and delayed payments to foreign oil producers for investment costs.

The IMF in July approved a three-year, $5.34 billion standby loan for Iraq in exchange for a package of economic reforms. The deal is expected to unlock a total of $18 billion in financial aid over three years.

Baghdad has also said it would try to sell $2 billion in bonds by the end of the year after failing to do so in 2015.

Sarhan Ahmed, a member of parliament's finance committee, said Zebari's sacking would "shake confidence" between the IMF and the Baghdad government.

"Today's move will undermine the ongoing efforts by Iraq to convince the IMF and other lenders it has a stable economic and political atmosphere," Ahmed told Reuters.

Baghdad-headquartered Rabee Securities' chairman, Shwan Ibrahim Taha, said it was unlikely the IMF deal or the bond offer would be endangered by changing a politically appointed official but lamented the departure of Zebari, whom he called "a very capable politician and a very capable minister".

Zebari, who could not immediately be reached for comment, took on the finance portfolio two years ago in the government formed by Prime Minister Haider al-Abadi.

There are no obvious replacements for him. Ministerial posts are distributed along ethnic, sectarian and party lines in keeping with a quota-based system set up after the U.S.-led invasion in 2003 that toppled Saddam Hussein.

Iraq is also waging war against Islamic State without a defense minister, who was sacked by parliament last month over separate corruption charges, and an interior minister, who resigned following a large suicide bombing in July in central Baghdad by the ultra-hardline group.

Critics have slammed the two ministers' dismissals as politically motivated and warned they risked undermining the country's already-fragile security situation.

(Writing by Stephen Kalin; Editing by Louise Ireland)

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