IMF: OIL PRICES WEAKEN IRAQ’S BUDGET FOR THIS YEAR
Counter / obelisk: An official at the International Monetary Fund, said the public finances in Iraq are increasingly prone to be affected by a drop in oil prices and the government may face difficulty in financing the budget plan this year.
Said Carlo Sdraljevic head of the IMF mission to Iraq, “there is a structural problem based fiscal policy largely on oil revenues and this dependence is growing, adding that” this trend is worrying because the price of oil, which achieves a balance between revenues and expenses on the rise a few years ago. ”
She estimates the fund in October / October last that Iraq, which relies on crude oil exports to reap about 93 percent of government revenues he needs an average oil price of 106.1 dollars in 2013 to adjust the budget, up from $ 95 a barrel in 2011, due to increased expenses .
But Brent crude is currently hovering around $ 107 per barrel is expected to decline gradually in the next two years to $ 103 in 2014 and $ 100 in 2015, with Astmrat enjoy good market supplies under the oil shale boom in the United States and increase the production of Iraq, according to the views of analysts.
He Sdraljevic “Another source of concern is the lack of flexibility of spending. There are many aspects of current spending and when they do not find him the government enough revenue to end up by reducing investments and this affects Pedroh negative growth in the long term.”
The IMF estimated that the budget of Iraq turned into a deficit of 0.7 percent of GDP last year, the first since 2010, compared with a surplus of 4.1 percent in 2012.
He says that Sdraljevic draft this year’s budget currently being debated by Parliament, including a significant increase in spending in its current form and perhaps Iraq faces difficulty in funding.
Earlier this month, Kurdish ministers withdrew from the session to the Iraqi government because of disagreements concerning the draft budget of revenues in 2014, which is estimated at 174.6 trillion dinars (150.1 billion dollars)
The head of the Finance Committee in the Iraqi parliament in a press statement that the budget grossly additional spending will collapse if the government continued to pay the share of the semi-autonomous Kurdistan region in northern Iraq, amounting to 17 percent of oil revenues, despite the detention of Kurdish oil export revenues.
He said the draft budget anticipates a deficit of 21 trillion dinars, assuming that the opponents of the Treasury Kurds oil export revenues of $ 400 thousand barrels per day. Sources in the oil sector that this goal is much higher than the current export capacity of Kurdistan, which amounted to about 255 thousand barrels per day.
Fund criticized in an earlier report Iraq because of poor planning and execution of the budget and overspending and poor implementation rates of investment.
Sdraljevic also said that Iraq must ensure the independence of the central bank and the government’s policy to keep the Reserve Bank’s management is separate from the Development Fund for Iraq.
He said the reserves of the Development Fund for Iraq, which is used by the government for public investment projects amounted to 6.5 billion dollars at the end of 2013 from 18.5billion dollars in 2012.
The smartest addition to this increased spending budget concerns that the government is using the ultimate foreign exchange reserves of the central bank’s 77 billion dollars to finance public spending, which could weaken the currency and increases inflation.