Between Oil And Debt: Iraq Faces The Challenges Of The Budget Deficit
June 21, 2024 Baghdad/Al-Masala Al-Hadath: The budget deficit for 2024 in Iraq constitutes a major challenge and reflects the gap between government revenues and expenditures, which imposes pressure on the national economy and leads to an increase in public debt.
Iraq relies on oil revenues as a main source of financing the budget. As oil prices fluctuate, it becomes difficult to predict revenues accurately.
Iraq resorts to borrowing to finance the deficit, which increases the size of public debt and negatively affects the cash reserves of central banks.
Economist Nabil Al-Marsoumi revealed the risks of the budget deficit for the year 2024, amounting to more than 64 trillion dinars.
Al-Marsoumi said in a blog post followed by Al-Masala, “The budget deficit amounted to 64.025 trillion dinars, as the revolving balance in the Ministry of Finance’s account reached 1.571 trillion dinars.”
He continued, “The increase in the selling prices of exported crude oil amounts to 16.607 trillion dinars,” noting that “remittances deducted from the legal reserve of government banks are equal to 5 trillion dinars.”
He added that “loans from government banks amounted to 3 trillion dinars,” noting that “the discount on treasury transfers at the Central Bank of Iraq amounted to 20.041 trillion dinars.”
He pointed out, “National bonds are worth 5 trillion dinars, and total internal borrowing reached 33,041 trillion dinars, and external loans amounted to 12,806 trillion.”
He stated, “Many observations were made regarding the budget deficit, including a decrease in the Ministry of Finance’s revolving balance from 23 trillion dinars in the 2023 budget to 1.571 trillion dinars in the 2024 budget.”
Al-Marsoumi added, “It has been observed that there is a heavy reliance on internal and external borrowing to finance the budget deficit, which exacerbates the size of internal debt, especially which currently stands at 79 trillion dinars, in addition to its negative impact on the cash reserves of the Central Bank of Iraq and other Iraqi banks.”
He concluded that “there are three sources in financing the budget deficit, which are deficit financing, internal and external borrowing, and the revolving balance of government accounts,” noting that “using the expected increase in oil revenues amounting to 16.607 trillion dinars to finance the budget deficit is something new because this increase is supposed to be added.”
The expected oil revenues. In this case, the budget will have been built on the assumption of exporting 3.5 million barrels per day at a price of $83 per barrel instead of $70, which is a non-conservative price and full of risks for two reasons.
The first is that Iraq’s oil exports are less than 3.5 million barrels per day due to OPEC+ restrictions. The second is that The high price of oil adopted by the budget is unrealistic and very optimistic, which may expose the budget to other imbalances as a result of these two assumptions not being met.” https://almasalah.com/archives/92260
No comments:
Post a Comment