Tag Archive | "Budget"

The latest Iraq Economic News – 2012 investment budget, infrastructure projects and more – brought to you by Iraq Business News

Time to Bite the Bullet

If Iraq didn’t face enough challenges already, the slump in the price of crude oil is another unwelcome development for the new Abadi government to deal with.

At a current price of $81.78, the benchmark West Texas Intermediate (WTI) crude is down nearly 25 percent from its June high, driven in part by a strong US dollar and weak Chinese demand.

This comes at a time when Iraq needs all the funds it can get to bolster its defences and eventually eliminate the existential threat from the Islamic State.

As difficult as it will be, Iraq’s parliament must finally agree a budget for this year based on the unpalatable reality that it is now facing.

It must also bite the bullet and accept that in order to fund the war for its survival, public sector cuts will be needed in 2015, and that it may have to run a budget deficit.

A devaluation of the Iraqi dinar is one possible consequence of a budget deficit, but this would also help the balance of payments and leave Iraq in a more competitive position.

Ignoring the budget problem won’t make it go away.

(Flag image via Shutterstock)

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“Soaring” Public Spending hits War Financing

By John Lee.

The Financial Times reports that a looming fiscal crisis is threatening to limit Iraq’s ability to finance its war against the Islamic State insurgents.

This is despite the country having large oil revenues, billions of dollars in reserves and surplus funds left from unexecuted projects.

In recent years, expenditures have “skyrocketed“, with the public payroll, and food and energy subsidies, taking up 70 percent of the public budget. In addition, as much as $500 million is needed every month just to feed the 1.75 million internal refugees who have been displaced in the war.

Baghdad also owes billions of dollars to the Kurdistan Region. The situation is not helped by the fact that parliament has yet to agree a budget for this year, at a time when oil prices have dipped below $90 a barrel.

Ashraf Abdelaal, the economic affairs officer for the UN mission to Iraq, told the FT:

“The IMF and the World Bank will not give Iraq one dollar until the budget has been approved … Credibility in the Iraqi system does not exist any more.”

(Source: Financial Times)

(Austerity image via Shutterstock)

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Budget Problems go Beyond Erbil-Baghdad Crisis

By Harith Hasan for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraqi parliament still has not been able to approve the draft general budget for 2014, prompting Prime Minister Nouri al-Maliki to warn of the possibility of a major financial crisis and a disruption of state institutions.

This delay in ratifying the budget is mainly because of the continuing dispute between Baghdad and the Kurdistan Regional Government (KRG) regarding Iraqi Kurdistan’s share of the budget. According to a member of the Maliki-led State of Law Coalition, the Kurds are demanding a 17% share of the budget, without deducting the revenues they obtain from the approximately 400,000 barrels of oil the region exports daily according to Iraqi government’s calculations.

Baghdad is demanding that Iraqi Kurdistan places its oil exports under the direct supervision of the State Oil Marketing Organization (SOMO), which is under the authority of the central Iraqi government. The Kurdistan Region of Iraq, however, refuses to do this. For their part, the Kurdish forces argue that the central government is disregarding the constitution, which grants the region the authority to supervise its own resources, and that Baghdad is trying to deduct from Iraqi Kurdistan’s share, which was decided upon in previous budgets.

These forces held a meeting in Erbil on Feb. 23 and issued a statement confirming the region’s right to “receive its share of Iraq’s revenues.” The statement noted that negotiations with Baghdad on this issue are ongoing and called on Maliki to abandon this “illegal and unconstitutional policy.”

An “independent” report on the Iraqi budget prepared by the Movement for Change (Gorran) noted that the actual share the budget grants to Iraqi Kurdistan is 9.9%, and that the government expects the region to export what amounted to 400,000 barrels per day under its supervision, compared to 250,000 a day last year.

According to the report, the government is demanding that auditing agencies from both Baghdad and Erbil identify and calculate Kurdish oil revenues, and that Erbil sends the amount to Baghdad on a monthly basis. These are conditions that the KRG considers to be unfair.

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Draft Budget Fuels Kurdish Export Row

Kurdish ministers have reportedly walked out of a cabinet session in protest at the country’s draft 2014 budget.

Reuters reports that the draft budget requires the Kurds to export 400,000 bpd, well above the region’s current export capacity, and says Baghdad will deduct any shortfall from the 17 percent share of state revenues to which they are entitled.

Industry sources estimate Kurdistan’s current export capacity at around 255,000 bpd, and do not expect it to reach 400,000 bpd until the end of this year or early 2015.

Kurdish members of parliament boycotted last year’s budget, but this did not prevent it being passed.

(Source: Reuters)

(Budget image via Shutterstock)

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Govt Allocates $14bn for Electricity

By John Lee.

The Ministry of Electricity’s 2013 budget has soared to $14 billion to help it end power outages in the country, reports Azzaman.

But the ministry’s spokesperson Musaib Mudaris said the blackouts will continue until the end of the year, by which time output will reach 13,000 megawatts, enough to meet the country’s domestic needs.

Mudaris said half of this year’s allocations were invested in power plants and enhancement of the national grid.

The ministry’s operating costs amount to $7 billion a year, he added.

Mudaris also revealed that Electricity Ministry’s budget in the years from 2003-2012 had amounted to $37 billion.

Currently, he said, Iraq’s combined power output was in the range of 11,000 megawatts, still short of the country’s total needs, estimated at 13,000 megawatts.

However, many in Iraq doubt whether the ministry will be able to put an end to outages any time soon, given the precarious security situation and the dramatic increases in demand due to improved living standards.

However, Mudaris insisted that the country to be able to produce up to 20,000 megawatts by the end of 2014.

(Source: Azzaman)

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Oil Production Fall Could Create Budget Deficit

By Matthew Gayle.

Iraqi parliament Oil & Energy Committee member, MP Suzan al-Sa’ad, recently stressed that the country’s decline in crude oil production during 2013 will lead to major deficit in the federal budget of 2014.

According to a report by the Oil Ministry, Iraq oil exports decreased at average of seven million barrels in June, following the sabotage of the northern pipeline and the bad weather.

The spokesperson of the Oil Ministry, Asim Jihad said some days ago that the oil exports for past June decreased to 69,800,000 barrel, at average of 2,326,000 barrel a day, while the oil exports reached in past May 76,900,000 barrel per day.

(Source: All Iraq News)

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Video: Baghdad holds Talks with KRG

From Iran’s PressTV. Any opinions expressed are those of the authors, and do not necessarily reflect the views of Iraq Business News.

Negotiations between Iraq’s central government and Kurdistan’s regional government have been described as productive.

Officials in the Kurdistan Region have sent a letter to Iraq’s ruling National Alliance. The alliance has visited Kurdish officials to help resolve the issues between the two sides.

Kurdish members of Iraq’s central government and parliament started boycotting sessions last month.

Iraq’s parliament passed the national budget without Kurdish consensus. Iraq’s parliament passed the national budget as Kurdish MPs and half of the opposition Iraqiya bloc boycotted the session.

Baghdad gave the Kurds a fraction of the billions of dollars requested for expenses for oil companies in Kurdistan.

Dale McEwan reports from Erbil for Iran’s PressTV:

(Source: PressTV)

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New Iraqi Budget Deepens Housing Crisis

By Omar al-Shaher for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The strenuous efforts exerted to handle the housing crisis were quickly rendered useless when the ratified 2013 general budget did away with the allocations for the housing fund, which was to grant loans for those wishing to build new homes.

The Iraqi parliament ratified the 2013 general budget on March 7 after a heated debate among involved parties regarding the share allotted to the semi-autonomous Kurdistan region. The budget did not include any housing allocations, which were held back until an increase in oil revenues is seen.

The housing fund is set out by the Ministry of Construction and Housing. The biggest real-estate funding body in Iraq, with a capital of one billion Iraqi dinars ($900 million), the housing fund was established specifically to solve the housing crisis.

The fund grants zero-interest loans in monthly payments with a ceiling of $30,000 for those wishing to build a private home in the Iraqi capital. Should the construction take place in other provinces, the loan limit drops to $25,000. The 2013 budget stipulated that allocations for this fund would come from the surplus in oil revenues, instead of from fixed budget lines.

This surplus, however, is not expected to be reached until the middle of the next fiscal year, which means that the fund will not receive any money in the coming months.

Director-general of the fund Burhanuddin Bassam affirmed that the fund would not accept new loan applications from any of Iraq’s provinces. He stressed that the available money could only cover the payments due to applicants who had already registered.

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