Britain warns Iraq of "big" deficit : No salaries for employees and no finance for projects versus new divisions
or to fulfill its obligations within the next three years.
The center said in a report briefed by "Shafaq News", that “ Iraq will not be able to provide other sources of income to finance its budget is the sale of oil to increase government spending by up to 60 % , compared to investment spending , the deficit ratio would be significant to the extent that it threatens to stop a number of projects in different parts of the country.
The report also pointed out that the general budget for 2014 amounting to nearly 150.1 billion dollars is not much different from its predecessors but it was marked this year by an increase in the deficit of 16.7 billion dollars last year to 18 billion dollars at a rate of 12 % of the total this budget .
Iraq’s budget for 2014 depends on the oil revenues by more than 95 % as it impact oil prices and the vagaries of international markets to finance the budget and expenses of those projects.
While Iraq relay on increasing its oil production to more than 4.7 million barrels until 2015 , but the oversupply in the global markets with a strong return for Iranian oil , the increase in the production of oil in the United States and the slow growth of the Chinese economy are all factors began to put pressure on the price of Brent crude which may fall over the next year in 2015 to about $ 100 a barrel .
New crises
According to ICDS , what Kurdistan Region export of oil is 400 thousand barrels per day, which is an important source of Iraq's budget , but the outstanding issues between Baghdad and Erbil regarding dues of oil companies and the budget of Pehmarga Guard Region and the disputed areas could hinder reaching an agreement concerning the revenue of these exports . The Iraqi government calls for obtaining revenue for the entire quantity exported in Erbil, while Erbil insist that the exports did not exceed 255 thousand barrels per day .
At a time Erbil conducted an agreement with Ankara Energy to export oil independently from the center , the government of Prime Minister , Nuri al-Maliki threaten to reduce the share of Kurdistan region from 17% to only 13% . And if the parties did not reach an agreement , the budget deficit may increase to about another $ 13.8 billion to reach nearly 22 billion dollars which accounted for 14.6 % , of the budget of 2014.
The report of ICDS shows that the general budget in Iraq are suffering from a significant rise in public spending , especially that large increases occurred due to paying retirement , increasing the minimum wage , installing staff contracts , compensations on rain and floods , student grants and other expenses which was a burden on this year's budget.
Iraq needs , according to the report to improve the reality of the infrastructure for oil and gas sector dramatically at a time the Iraqi government announces its intention to increase its oil exports , but the actual exports in the last year of 2013 was amounted to 872.3 million barrels , an average of 2.39 million barrels per day , compared to with average daily production of 2.42 million barrels per day during 2012. The annual revenues of oil exports during 2013 was amounted to nearly 89.22 billion dollars, less than oil revenues recorded a year earlier in 2012 , amounting to 94.02 billion dollars.
Attempts to finance the deficit
At the time , Iraqi government sources talk about a lot of pressure as a result of higher expenses , the report of the International Center for Development Studies is expected to increase the budget deficit to the extent that the state you will not be able to pay salaries to its workers or its obligations to its citizens what has forced them to use a part of the Iraqi Central Bank reserves of 80 billion dollars .
In an attempt to finance the huge deficit in the budget , Central Bank of Iraq plans to ingot pure gold to sell them to citizens and investors in Iraqi dinars . The Iraqi government decided to deal with the deficit in the budget of 2014 by offering Treasury Bills that the central bank would buy . The Iraqi government also agreed to offer third-generation services frequencies of communications in public sale auction to wishingcompanies.
The report indicates that Iraq needs to spend nearly a trillion dollars over the next ten years to develop its oil sector and a number of strategic projects most notably housing and industry. However, this figure seems far-fetched , especially in light of the difficult conditions to attract foreign investment , lack of flexibility of the system and the economic failure of the banking environment in Iraq .
In case Iraq do not succeed in reducing its government expenses and reform of its economic system and its institutions , which suffer from red tape and bureaucracy, financial and administrative corruption in addition to the diversification of income sources , find quick solutions to provide security and stability , it could pressure in future the formation of new regions that announces its split from the center which raises questions about the future of Iraq as an oil and a strong economy .
