CALLS TO REMOVE OIL FROM THE BUDGET: A BOLD REFORM PATH OR A GAMBLE THAT COULD UNDERMINE IRAQ’S FINANCIAL STABILITY?
The phrase “oil belongs to the people” has been transformed from a constitutional text that is supposed to establish economic justice and sustainable development, into a slogan that is invoked during crises without actually being reflected in the structure of the Iraqi economy.
After decades of almost complete dependence on oil revenues, questions are mounting about the viability of this model, especially in light of the disruption of productive sectors, the decline of agriculture and industry, and the continued fragility of the budget in the face of fluctuations in oil prices.
As the next year and the upcoming budget discussions approach, the debate resurfaces regarding the meaning of public ownership of oil, the limits of its use, and the possibility of moving towards a diversified economy that reduces dependence on a single resource that has proven to be as much a source of danger as a source of funding.
Experts believe that continuing to link the general budget to oil revenues deepens the structural imbalances in the Iraqi economy and keeps the state hostage to the fluctuations of global markets. They warn that this approach has contributed to weakening the productive sectors, especially industry and agriculture, and has transformed the economy into a rentier model that lacks sustainability. The absence of a clear economic identity and the fluctuation of financial policies have contributed to the mismanagement of public capital, which calls for a review of the philosophy of preparing future budgets and a move towards diversifying sources of income and strengthening non-oil revenues to ensure long-term financial stability.
For his part, economist Abdul Rahman Al-Sheikhli explained that the phrase “oil is the property of the people” in the Iraqi constitution does not mean total dependence on oil revenues to finance the general budget, but rather indicates the people’s ownership of this wealth and the need to manage it in a way that achieves economic sustainability and preserves the rights of future generations.
Sheikhly told Iraq Observer that “the monarchical governments in Iraq did not include oil revenues in the general budget, but rather allocated them for emergencies,” emphasizing that “this approach was more disciplined compared to the financial policies adopted at present.” He added that “Articles 111 and 11 of the Iraqi Constitution clearly stipulate that oil belongs to the people, which means that the general budget must be directed towards relying on non-oil revenues, and oil should not be the primary source for covering operational expenses.”
Al-Sheikhli pointed out that “oil has turned into a liability to the Iraqi economy at the present stage, as a result of the almost complete dependence on it, which has caused a large number of production plants to stop, and the decline of the agricultural sector, on which Iraq was mainly dependent in securing its needs.”
He emphasized that “this dependence has created a fragile economy and stifled production, contributing to the weakening of genuine development opportunities,” calling for “the revitalization of the industrial and agricultural sectors as sustainable sources of national income.” Al-Shaykhli stressed “the necessity for next year’s budget to include a reduction in dependence on oil, limiting it to no more than 49 percent of total revenues, thus ensuring the diversification of income sources and mitigating the risks associated with oil price volatility.” Article (111) of the Constitution of the Republic of Iraq of the year (2005) in force states that “Oil and gas are the property of the Iraqi people in all regions and governorates.”
According to experts, this text is consistent with public international law, which considers natural resources to be the property of the people, not the property of parties or the authorities, and that the state is only a tool for management, distribution, and development.
This is what was emphasized by the resolutions of the United Nations, including its resolution No. (1803) of 14/12/1962 entitled “Permanent Sovereignty over Natural Resources”, which stressed the need to exercise the right of peoples and nations to permanent sovereignty over their wealth and natural resources in accordance with the interest of their national development and the welfare of the people of the state concerned.