Thursday Morning Iraq Economic News Highlights 3-16-23
An Economist Explains The Kurdistan Region’s Share Of The Tripartite Budget
Money and business Economy News-Baghdad On Thursday, economic expert Nabil Al-Marsoumi explained the shares of the Kurdistan region from the 2023 budget, amounting to 12%.
Al-Marsoumi said in a Facebook post seen by “Al-Iqtisad News”, that “with regard to Kurdistan in the 2023 budget, the Ministry of Finance will pay the loan amount of 400 billion dinars granted to the Kurdistan region according to Cabinet Resolution No. 333 of 2022 by the Iraqi Trade Bank from the region’s share for the current year.” Pointing out that “Kurdistan’s share of actual spending after excluding sovereign expenditures = 12.67%.”
He added, “The wages for the operational costs of producing and transporting crude oil exported by the region are among the sovereign expenditures.”
He pointed out that “the Kurdistan Regional Government is committed to exporting crude oil from its fields at a rate of not less than 400,000 barrels per day.”
He explained that “the deposit of the total revenues of the oil produced from the fields of the region takes place in one bank account in which all revenues derived from the export or sale of crude oil and its derivatives are deposited without any deductions for any purpose whatsoever. “.
He noted that “a percentage of the allocations of the federal ground forces of the Iraqi army is allocated to the Peshmerga forces according to the population ratios of the aforementioned forces,” noting that “the Kurdistan Regional Government is committed to handing over non-oil revenues to the state treasury.”
Al-Marsoumi stated that “50% of the revenues of the border crossings are allocated to the governorates in which these crossings are located, including the Kurdistan region.”
He continues, “The Federal Ministry of Finance is committed to paying the region’s dues under the provisions of this law on a monthly basis.” https://economy-news.net/content.php?id=32970
Planning: The Amount Of The Deficit Is About 60 Trillion Dinars, And Part Of It Is Paper
March 16, 2023 Baghdad / Obelisk: Minister of Planning Muhammad Tamim announced, on Thursday, the addition of 21 trillion dinars to the 2023 budget to cover salaries.
Tamim said in a statement during the Seventh Sulaymaniyah Forum: “I was assigned to prepare the budget for 2023, 2034 and 2025, and we had limited options and great challenges, and we started with the issue of preparing the budget by going towards defining what are the priorities according to the government program in a realistic way.”
And he added, “When we went to the expenditures, we found that the expenditures had greatly inflated, with limited resources, and this matter prompted us to reconsider the expenditure chapters and the need to define these chapters in a manner consistent with the government’s directives.”
He pointed out that “the amount of the deficit is about 60 trillion dinars, and part of this deficit is a paper deficit.”
He pointed out that “we added in this budget 21 trillion Iraqi dinars to salaries, and this is not a governmental decision, but rather the decision of the previous parliament and the two previous governments, in addition to the emergency support law to install contractors.”
And he indicated, “This government did not take a single decision to appoint one person, even if he was in the offices of ministers and the new government.. Adding operational amounts to the budget was a result of the decisions of previous governments and the previous parliament.”
Expert: The Revenues Planned In The Budget Are Not Realized, And The Deficit May Reach 90 Trillion Dinars
2023.03.16 – Baghdad – Nas On Thursday, economic expert Manar Al-Obaidi predicted that the 2023 budget deficit would reach 90 trillion dinars, while he ruled out achieving the planned revenues.
Al-Obaidi said in a clarification followed by “NAS” (March 16, 2023), that “the planned revenues in the 2023 budget amount to 136 trillion dinars resulting from 101 trillion at a rate similar to the rates of previous years from oil sales, 13 trillion dinars for Kurdistan’s oil may not be achieved.” It is received, and 7 trillion dinars for added oil sales above the normal rate may not be achieved, and 17 trillion non-oil revenues may not achieve only 7 trillion dinars, which is the annual rate for previous years.
And he added, “The planned revenues of 136 trillion may not actually achieve more than 108 trillion, and the planned deficit is 60 trillion dinars, and the deficit may reach 90 trillion dinars if the revenues are not achieved.”
And he stated, “The deficit-to-GDP ratio in the Financial Management Law should not exceed 3%, i.e. it should not exceed 11 trillion Iraqi dinars, and the current planned deficit-to-GDP ratio is 16%, and the deficit-to-GDP ratio is 24%.” “.
And that “every drop in the price of oil by one dollar costs revenues 1.5 trillion Iraqi dinars.”
He pointed out that “the drop in the oil price to the rate of 60 dollars means a loss of revenues by 15 trillion dinars, which will increase the deficit gap.”
Earlier, Professor of Economics at the University of Basra, Nabil Al-Marsoumi, spoke about the impact of low oil prices on the Iraqi budget.
Al-Marsoumi said in a post, followed by “NAS”, (March 15, 2023), that the price of Brent crude fell to $73 a barrel due to the collapse of the American banks Silicon Valley and Signature, which reinforced concerns about the risks faced by other banks from sharp increases in interest rates by the central bank.
The American over the past year, which led to a sharp decline in fuel demand caused by the downsizing of technology companies on a large scale, in addition to reducing travel expenses for their employees, as many startups in the technology sector were seen as potential consumers of oil and gas in the Middle East.
In the future, its collapse led to a decrease in expectations related to the growth of oil demand in the future, and it reinforced the fears of the failure of Credit Suisse, which is the second largest bank in Switzerland, fears about the outbreak of a new global financial crisis, such as the one that occurred in 2007-2008, which was reflected negatively on stocks. European and American.
He added, “In addition to the repercussions of the Silicon Valley Bank crisis, oil prices are also under pressure due to signs of a slower-than-expected recovery in the Chinese economy despite the lifting of its strict restrictions related to the pandemic, as well as US statements about the possibility of setting a higher ceiling for the price of Saudi oil and the rise in US oil stocks.
These repercussions on global oil prices have a clear impact on the Iraqi budget, which has adopted an unconserved price, which is 70 dollars per barrel, which is the highest among Gulf budgets. It will exacerbate the budget deficit and increase internal and external debts, especially since Iraq, without all the oil countries, lacks a sovereign fund that can be a buffer in cases of oil prices falling below their normal levels https://www.nasnews.com/view.php?cat=103920
Masoud Barzani Hopes For The Issuance Of The Oil And Gas Law And Considers The Budget A ‘Positive Step Forward’
2023.03.16 – Baghdad – Nas In an interview with the American newspaper Al-Monitor, Massoud Barzani, leader of the Kurdistan Democratic Party, expresses his hope that the “positive atmosphere” that surrounded the recent talks between the KRG and the KRG over the budget would lead to talks on the elusive oil and gas law.
“I will not say that we 100% prefer the budget decision, but I think it is a positive step forward,” Barzani said in the interview, which was followed by “NAS” (March 16, 2023).
The following are excerpts from the interview:
Federal Budget and Oil Law:
The Kurdistan Region’s share of the Iraqi budget under the proposed legislation is 12.6%, according to Iraqi Prime Minister Mohammed Shia al-Sudani, who met Barzani in Salah al-Din on Tuesday.
“This case has been exploited unfairly against the Kurdistan Region in the past,” Barzani said, referring to a long-running dispute over the proportion of Iraqi government revenues to be allocated to the Kurdistan Region.
“I wouldn’t say the budget decision is 100 percent what we wish for, but I think it is a positive step forward,” he said.
Barzani expressed hope that the “positive atmosphere” surrounding the budget talks could mean good news for an elusive oil law.
“Since 2007, the Kurdistan Regional Government has been willing to issue this law in parliament,” he said. The successive governments in Baghdad have so far backed down from that, and have not yet reached a conclusion. But with the current positive climate, I believe this will help pass the oil law and other pending legislative issues.”
The American role in Iraq and the region:
Barzani noted that current US priorities may have changed, with China and Ukraine high on the national security agenda, but “this does not mean that the US does not take things seriously” in Iraq and the Middle East.
Barzani said, “You cannot compare the current conditions with the conditions of previous eras, but the United States still looks at the region with importance.”
The Kurdish leader noted that US Defense Secretary Lloyd Austin – “our close friend” – visited Iraq last week.
Barzani said that Austin “stressed that the United States attaches importance to the region and continues relations and contacts with the players,” adding that “the ISIS threat continues.”
The Iranian-Saudi agreement:
Barzani welcomed the agreement brokered by China between Iran and Saudi Arabia, saying, “Of course, we would like to see an end to the tension between the countries of the region. Iran and Saudi Arabia are two important countries in the region.”
“Maybe it’s too early to pass judgment, to talk too much about it, but at least any efforts to ease tension are welcome,” Barzani said.
On China’s role, Barzani said, “They are quietly working to fill some of the gaps left behind.”
Barzani said, “We hope that the agreement between Iran and Saudi Arabia will be a sign that Iran is moving away from the language of intimidation and threats, and towards dialogue and diplomacy, to accommodate the opinions of others and settle issues through mutual understanding.”
Iran’s position on the region:
In response to a question about the Iranian missile attacks on the Kurdistan Region last year, Barzani said, “It is absolutely unjustified and the accusations are baseless.”
Iran has accused the Kurdistan Region of Iraq, and the government of Iraq, of failing to prevent armed Iranian Kurdish opposition groups from launching attacks in Iran during the protests following the death in custody of Mohsa Amini on charges of violating the veil in September 2022.
“Some institutions in Iran – in order to cover their failures in the country – were trying to find an external scapegoat,” Barzani said.
“Iran is a neighbor, we do not want any tension with them, and we want to have normal relations as possible,” he added.
“We are not part of the skirmishes or settling scores [with Iran],” Barzani said. “We cannot allow our land to be a base for threatening the security of our neighbours.”
The position on Syria:
Barzani welcomed the steps taken by the Arab countries to re-engage Syria.
“Since 2011, Syria has witnessed a state of chaos, with killings, displacement, refugees and mass destruction,” Barzani said. “But there was no indication of what might come next,” referring to efforts and hopes for regime change for the government of Syrian President Bashar al-Assad.
“Who will be the replacement?” Barzani asked. There are no clear answers and no clarity in policies for the future of Syria.
With Arab rapprochement, he said, “there can be some stability in the country and at least an end to the cycle of violence and a return to a degree of normal life.”
Fluctuation And Decline In Oil Prices And Their Impact On The Budget
Falah Al-Amiri We have already adopted the price of oil for budget purposes. It was raised on more than one occasion, and since 2010 it is for the government to adopt a price of 40-45 dollars for budget purposes for a period of five years, to be reviewed after the end of that period.
However, successive governments continued to adopt the tendency of rentier economy and use the operating budget to escape forward instead of focusing on solving the problems of the private sector and facilitating its procedures and developing it to reduce pressure on the public sector and move towards expanding the market economy, in addition to applying governance in obtaining non-oil revenues.
With regard to the 2023 budget, we expected that the price of oil for budget purposes would not exceed 60 dollars or even 65 dollars, which is a price previously adopted in some previous budgets, according to Iraq’s financial conditions. But the adoption of $70 was a surprise, especially with the new official exchange rate of 1320.
In general, it seems that there are several reasons that prompted the current government to adopt the price of 70 dollars per Maronite this year, including an unprecedented huge operational budget, as follows:
- The government will use the accumulated financial abundance from 2022.
- During the first and second months of this year, large quantities of basic foodstuffs were purchased from the funds of the Food Security Act. This may reduce costs.
- The average price of Iraqi oil exceeded 74 dollars a barrel during the first quarter of this year, and this helps to absorb a shock in the decline in oil prices later.
- The expected world oil price for the year 2023 ranges between 65-80 dollars per barrel, and some expectations may reach the price of 90 dollars, and this is exaggerated, but the expected annual rate is 70 dollars per barrel. Of course, these expectations take into account the existence of a global economic recession and the possibility of its expansion.
- The continuation of the Russian-Ukrainian war is a major factor in the fluctuation and instability of oil prices, up and down.
- Russia and Saudi Arabia will work hard to keep the oil price at least $70 per barrel as an annual average for oil prices in general, and this price is commensurate with their annual budgets and financial situation.
- Western governments are working seriously to avoid a financial collapse, as happened in 2008, because this time it will be more dangerous because the peoples of these countries have suffered from high prices and energy shortages, and have drained them financially.
- The government acted smartly when it presented a budget of this size, ramifications, and details, especially the public expenditure side, which members of Parliament had an important role in increasing through the appointments that were proposed, and tens of thousands of citizens, especially teachers, graduates, higher degrees, daily wages, and others, were confirmed.
- The government has thrown the ball in the parliament’s court. The members of the Parliamentary Finance Committee will conduct an extensive study of the budget. I think there will be no fundamental changes, whether in the budget items or the price of oil, as it focused on financing salaries, public service projects, health and others that concern citizens, in addition to covering sensitive matters such as projects of the Ministry of Oil and Electricity.
It has touches that achieve social justice for the distribution of income and contribute to relative social stability. And if Parliament decides to reduce the price of oil, perhaps to the price of 65 dollars a barrel, then this may require the deletion of some items of operating expenses that may be very sensitive in the tightly built budget, and that any change scores a point for the government, not Parliament.
- The political blocs that nominated the government have certainly seen, at the very least, some important and basic items and figures in the proposed annual budget, and there is no doubt that they will discuss the budget with their representatives in Parliament and direct them to approve the budget and pass it quickly and avoid obstruction or delay and without making fundamental changes.
Finally, I believe that adopting a price of 65 dollars per barrel is considered an acceptable settlement between Parliament and the government if Parliament decides to change the price of oil and some budget items or reduce the deficit for this year.
He suggested that the government adopt a downward price for the price of oil for budgetary purposes in the coming years. https://economy-news.net/content.php?id=32969