Iraq's Budget Crisis: Import Spending Soars!

DINAR REVALUATION REPORT: When Will the Iraqi Government Resort to Amending the Budget Law? An Economic Expert Explains, 12 SEPT

When Will the Iraqi Government Resort to Amending the Budget Law? An Economic Expert Explains

As of September 12, 2024, Iraq's reliance on oil revenues continues to dominate its economic landscape [1]. Over the past decade, oil revenues have accounted for more than 99% of exports, 85% of the government's budget, and 42% of gross domestic product (GDP). This heavy dependence on oil exposes the country to macroeconomic volatility, particularly when oil prices fluctuate [1].

In June 2023, the Iraqi Council of Representatives approved the federal budgets for 2023, 2024, and 2025, marking the first time a three-year budget was enacted [2]. The 2023 budget was the largest in Iraq's history, totaling 198.9 trillion Iraqi dinars (approximately $153 billion) [2]. The budgets for 2024 and 2025 are set to remain the same, unless the cabinet requests amendments and Parliament approves them [2].

Iraq's budgeting process has been historically slow, with no budget passed in three of the past nine years (2014, 2020, and 2022) [2]. The three-year budget offers a measure of stability, ensuring that the government has a budget until the next federal elections in late 2025 and provincial council elections scheduled for 2024 [2].

However, the government's reliance on oil revenues, which account for nearly all state revenue, leaves Iraq's economy and budget in a precarious position [3]. Oil is a volatile commodity, and Iraq has limited control over the global oil market. This vulnerability to oil market fluctuations and the decisions of other OPEC members could necessitate budget amendments [3].

Moreover, the complexity of tax legislation, tax evasion, lack of tax awareness, delays in collections, weak supervision and control, and conflicts in tax laws and legislation between different directorates have prompted the Council of Ministers to issue new tax reform instructions starting in 2024 [4]. These reforms aim to address the issues within the tax system that could affect the government's income and budgetary planning [4].

When Will the Budget Law Be Amended?

The decision to amend the budget law will depend on several factors. Chief among them are changes in oil prices, the performance of the non-oil economy, and the government's fiscal needs [1]. If oil prices fall significantly or if non-oil sectors do not perform as expected, the government may need to adjust the budget to ensure fiscal stability [1].

Additionally, the effectiveness of the tax reform instructions and the government's ability to collect revenues could influence the need for budget amendments [4]. If the reforms are successful in increasing tax compliance and collections, the government may have more fiscal space to adjust the budget without compromising its financial stability [4].

Expert Analysis

An economic advisor to the Iraqi government, Mazhar Muhammad Salih, has stated that the three-year budget approach is specifically designed to facilitate long-term planning [5]. The finance and planning ministries can use the Financial Management Law No. 6 of 2019 to make adjustments to the budget over the coming years, as long as Parliament approves them [5].

This flexibility allows the government to account for changes in oil prices or other economic developments, which could lead to amendments in the budget law [5]. The ability to make such adjustments is crucial for maintaining fiscal stability and ensuring that the government can respond to economic fluctuations [5].

Conclusion

The Iraqi government's decision to amend the budget law will be influenced by the evolving economic conditions, including oil prices, tax reforms, and non-oil economic performance. The three-year budget approach offers a level of stability but also the flexibility to make amendments as needed. The government's ability to navigate these challenges will be crucial in maintaining fiscal stability and ensuring the country's economic resilience [3].

LATEST FROM MNT GOAT, 13 SEPT

 Mnt Goat  

 I am going to give you a summary...of the other issues that are...on the table. They are on the near horizon and my CBI contact has also told me these are issues that also must be resolved:  Passing the Oil and Gas Law referendum, as required by their new 2005  Constitution.; Needed changes to The Investment Law No (13) of 2006 to meet the WTO requirements prior to full accession.; Institute the Pillars of Financial Reform in the Banking, Insurance and the Iraqi Stock Market. 

This goes hand in hand with the electronic banking effort...

Iraq is going forward with the Project to Delete the Zeros and actually in the process of doing it not just talking about it again...we must stay grounded as this RV is coming to a closure and there is not much longer to wait.

   ...recently they have told us this electronic platform is going away at the end of 2024... corruption and money laundering is now all ending and has to end or we will not see any reinstatement. The instrument to do this is the Electronic Banking practices...

 Having the US Treasury inside of Iraq now helping with all these banking reforms is a VERY good thing not a negative issue. It is absolutely going to push the RV process for us...We might even say it is the LAST piece to put in place in the RV puzzle to clearly see the end to this RV saga.

IRAQ'S OIL LAW CRISIS

DINAR REVALUATION REPORT: International Coalition Withdrawal in Iraq: Government-Political Agreement 2024, 13 SEPT

 International Coalition Withdrawal in Iraq: Government-Political Agreement 2024

In a significant development, the United States and Iraq have agreed to initiate talks aimed at setting a timetable for the phased withdrawal of troops and the conclusion of the US-led military coalition's presence in Iraq. 1 

The US has maintained a military presence in Iraq since the 2003 invasion, with troops returning in 2014 to assist the Iraqi government in defeating the Islamic State (ISIL). The presence of US forces has been a contentious issue, particularly among Iran-aligned militias and politicians in Iraq.

The Iraqi Ministry of Foreign Affairs has announced plans to formulate a specific and clear timetable for the gradual reduction and eventual end of the international coalition's presence in Iraq. 1 The statement emphasized Iraq's commitment to ensuring the safety of coalition advisors during the negotiation period and maintaining stability to prevent any escalation of tensions.

US Secretary of Defense Lloyd Austin confirmed that these discussions would be part of a higher military commission, agreed upon in August 2023, focusing on the transition to an enduring bilateral security partnership between Iraq and the United States.  1

Regional Tensions Impacting Withdrawal

Recent developments have led to the postponement of announcing a definitive end-date for the US-led coalition's presence in Iraq. 3 Heightened tensions in the region, particularly with Iran, have raised questions about the future of the US military presence in Iraq. The potential for Iranian retaliation against Israel, in response to the killing of Hamas' political leader, Ismail Haniyeh, in Tehran, has added to the uncertainty.

Iran-backed militias in Iraq are exerting pressure on the Shia-led government to terminate the US troop presence. Attacks on US sites in Iraq have increased since October 7, 2023, with the US responding with retaliatory airstrikes against these groups. 3

Bilateral Relations and Strategic Reevaluation

The US-Iraq relationship has been under reevaluation since the capture of the Syrian town of Baghouz in March 2019, marking the end of the Islamic State's physical control. 4 The US military's return to Iraq in 2014 played a crucial role in helping the country rebuild its national forces, which were weakened by the IS offensive. However, the increasing influence of pro-Iranian factions within the Popular Mobilization Forces (PMF) has complicated the situation, leading to demands for a complete US withdrawal.  4

Iraq's government, led by Prime Minister Mohammad Shia al-Sudani, is attempting to balance relations with both Washington and Tehran. The ongoing war in Gaza has added another layer of complexity to the dynamics, affecting the strategic relationship between the US and Iraq. 4

Partial Withdrawal and New Security Agreements

The US and Iraq are nearing a pivotal agreement that would result in the gradual withdrawal of American-led coalition forces from Iraq. 5 Sources close to the Iraqi government have indicated that both parties are in the final stages of concluding the deal, with the understanding that the coalition's mission is drawing to a close. The agreement allows for some international and American forces to remain in the country under new security agreements, focusing on training Iraqi security structures. 5

Security and Political Developments

Iraq's Defense Minister, Thabit al-Abbasi, held discussions with US officials in Washington regarding future steps to end the Global Coalition's mission against ISIS. 6 Talks have centered on commencing the coalition's drawdown from Iraq in September 2024 and concluding the process by September 2025, with negotiations ongoing regarding the retention of some US military personnel in an advisory capacity. 6

Amid these developments, Iraq is also striving for regional cooperation in counter-narcotics efforts, hosting an international conference with the participation of neighboring countries to combat the growing issue of drug trafficking. 6

International Coalition.. Withdrawal by Government-Political Agreement, 13 SEPT

 Professor of Foreign Affairs at Al Nahrain University, Mohammed Al Shammari, commented on the decision to withdraw the international coalition forces from Iraq, describing it as a “governmental-political agreement.”

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Al-Shammari said, during his hosting in the {Free Talk} program broadcast on Al-Furat satellite channel this evening, that: “The decision to withdraw the coalition forces is Iraqi and did not come only from the Prime Minister, but rather by agreement of the political forces in the State Administration Alliance that brings together all spectrums, and as a result, it expresses the position of the state as a whole.” 

He added, “The Iraqi political decision necessitates the withdrawal of foreign forces and the move towards diplomatic relations, and distancing Iraq from regional challenges has become difficult in light of the presence of these forces.”
Al-Shammari added, “Moving from the formula of collective cooperation to a secondary one is logical, as a result, we want relations at all levels with the United States and other countries.”

He explained, “The presence of the international coalition is linked to a government request, and its exit is also subject to the contexts of the law and international agreements; however, the Iraqi forces do not need the support of the coalition forces, but rather need logistical and intelligence support.”

Al-Shammari continued, “The United States does not reject the withdrawal of its forces from Iraq, but is working to find a good formula to preserve its interests in the country, and the Iraqi side must work rationally without granting any concessions.”
Regarding the Iranian response, Al-Shammari said, “All indications confirm that Iran will not back down from its response to the Zionist entity; but it seeks to create a political balance that ensures that it is not dragged into ill-considered reactions.”
Defense Minister Thabet Al-Abbasi revealed details of the agreement to withdraw the international coalition from Iraq. He said in a press statement that the Iraqi-American committees agreed to withdraw while maintaining a security partnership. He explained that an Iraqi-American agreement to end the mission of the international coalition will be in two stages.
– The first stage of the American withdrawal will begin this year and continue until 2025, and the other stage of the American withdrawal will end in 2026 completely.
Al-Abbasi pointed to the proposal of the US Secretary of Defense {Lloyd Austin} that two years for the withdrawal is not a sufficient period. He announced the rejection of the US Secretary of Defense’s proposal to add another year to the withdrawal period.
Reuters reported that the United States and Iraq agreed on a plan to withdraw the international coalition forces from the country. It indicated that the understanding between America and Iraq will witness the departure of hundreds of soldiers by September 2025, and the departure of all forces in 2026.

Wafaa Al-Fatlawi

https://alforatnews.iq/news/%D8%A7%D9%84%D8%AA%D8%AD%D8%A7%D9%84%D9%81-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D9%8A-%D8%A7%D9%86%D8%B3%D8%AD%D8%A7%D8%A8-%D8%A8%D8%A7%D8%AA%D9%81%D8%A7%D9%82-%D8%AD%D9%83%D9%88%D9%85%D9%8A-%D8%B3%D9%8A%D8%A7%D8%B3%D9%8A

MILITIAMAN CC NOTES HIGHLIGHTS, 12 SEPT

 Summary

Iraq’s Ministerial Council of Economy is advancing economic unity between the federal government and Kurdistan, focusing on financial reforms and salary equivalency.

Highlights

• 🤝 Collaborative Meetings: Recent meetings between the federal government and Kurdistan aim for economic unity.
• 💰 Salary Equivalency: Discussions include ensuring salary parity for regional employees.
• 🔍 Budget Reforms: Emphasis on addressing financial issues like oil, energy, and border revenues.
• 📈  Private Sector Growth: Plans to enhance the private sector’s role in the economy.
• 🌍 Global Attention: Iraq’s economic strategies are gaining international interest.
• 📊 Unified Treasury Accounts: Establishing a unified treasury for better financial management.
• ⚖️ Constitutional Rights: Ensuring all citizens benefit from new economic policies aligned with constitutional rights.

Key Insights

• 🌐 Economic Integration: The meetings signify a critical step towards integrating Kurdistan’s economy with the federal framework, promoting a cohesive financial strategy.
• 💼 Private Sector Engagement: By focusing on private sector involvement, Iraq aims to diversify its economy and reduce dependency on oil revenues, fostering sustainable growth.
• 🔗 Unified Financial Framework: The establishment of a unified treasury account reflects a commitment to transparent financial management and accountability, which is vital for investor confidence.
• 📈 Revenue Streams: The focus on oil, energy, and border revenues indicates a strategic approach to harnessing Iraq’s natural resources for economic stability.
• 🤔 Constitutional Compliance: The emphasis on constitutional rights in financial discussions demonstrates a commitment to equitable governance and fair resource distribution.
• 🏛️ Political Dynamics: The support for Prime Minister Al Sudani highlights the political backing necessary to implement these reforms, ensuring stability during transitions.
• 🚀 Future Prospects: The positive atmosphere in these meetings suggests potential for significant economic progress in Iraq, attracting global attention and investment opportunities.