Higher Oil Prices Boost Iraqi Budget

Iraq expects to cover a projected budget deficit of about $18 billion this year by selling oil at higher-than-expected prices, Finance Minister Baqir Jabr al- Zubaidi said.

“We will cover the budget with the difference in oil prices,” Zubaidi said in an interview today in Istanbul, where he’s attending an Arab-Turkish forum. The Iraqi budget is based on oil prices at $62.5 per barrel, and in agreements already made “we sold at $74,” he said.

The government also plans to sell domestic bonds valued at about $4 billion this year, al-Zubaidi said. About $2.4 billion of those bonds have already been sold. The minister said Iraq doesn’t plan to sell on international markets.

Iraq holds the world’s third-largest oil reserves, with 115 billion barrels, behind Saudi Arabia and Iran. The International Monetary Fund forecasts that its economy will expand 7.3 percent this year and 7.9 percent in 2011.

IMF and Iraqi authorities are projecting average production of 2.6 million barrels of oil a day and exports of 2.1 million barrels a day this year. Next year, those projections rise to 2.9 million and 2.3 million.

Al-Zubaidi said the government expects the economy to expand about 10 percent next year and is targeting a growth rate of 12 percent in 2012 and 14 percent the following year.

He said the budget may expand from about $70 billion this year to $100 billion by 2013 and $150 billion within seven years, driven by revenue from oil bids.

The Iraqi central bank cut its key interest rate by 1 percentage point to 6 percent in April to fuel growth.

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