Researcher Shatha Khalil *
Translated by : mudhaffar al-kusairi
Economists expected that the year 2020 will be one of the most difficult years for Iraqis economically, and this is a result of the poor political performance of the government, and the widespread corruption in all joints of the state, which causes the waste of most of the country’s imports and its going into the pockets of the corrupt, and smuggling them out of the country, in the absence of legal accountability.
Iraq’s budget for 2020, which is still in circulation in light of the difficult conditions in which Iraq lives, protests in the Iraqi street, and the activity of parties and militias, complete chaos , the picture has not yet emerged to draw the features of the new government , and until now the draft of the budget has not been submitted to Parliament , and we are a few days a way from the beginning of the year 2020, that foreshadows an imminent economic disaster for Iraq.
Initial budget figures indicate that its size will be approximately 150 trillion dinars, which is a large number and even greater than all past budget numbers, but evidence indicates that it will be the worst at all, and the first and most serious problem is the size of the large deficit in it…
Here is a detailed explanation of the Iraq budget 2020 :
If Iraq now gets $ 72 billion in annual oil revenues (with 4 million barrels of oil exports per day, at $ 50 a barrel), then the main ruling expenditures in the state’s general budget, which do not need any doubts, are as follows:
– $ 40 billion salary.
– $ 25 billion for the oil and gas sector and licensing rounds costs.
$ 20 billion to pay off debt and compensation payments, totaling $ 100 billion, with a deficit of $ 28 billion in revenue compared to (only) these expenses. ”
If we add non-oil revenues (estimated at $ 10 billion at best), the net deficit will be $ 18 billion,”while“if all of our oil revenues do not cover these expenses (and they often do not cover them, where the general budget suffers Successive of a “fixed” deficit of at least $ 25 billion annually, and needs other sources of funding).
What about the rest of the expenditures represented by the investment budget expenditures, the requirements for the advancement of destroyed infrastructure, and the costs of stalled and idle projects, and the development and investment expenditures in a country where the majority of its population suffers from unemployment and poverty, and all its cities, districts, areas, and villages suffer from sustainable ruin, no schools, no reconstruction , no health, no infrastructure, but what about spending on the rest of the other operational budget items (goods and services), which are not less than 20 billion dollars?
The 2020 budget included new paragraphs that led to a significant increase in expenditures due to the huge public pressure and the demonstrations that circulated throughout the country, which call for reform and providing job opportunities and improving bad services, as financial allocations were added to the new appointments, return the dismissed, and the allocation of new sums to improve the various services, as well as reducing lots of fees and taxes in an attempt by the government to absorb public anger.
As for maximizing resources for the budget, this is almost impossible, because our budget depends mainly on oil imports at a rate of more than 93%, and the volume of oil exports is set in the budget at about three million and eight hundred barrels per day, and at a price of about $ 52 a barrel, including the region’s share amounting of 250 thousand barrels per day where there is no real guarantee of delivery it by the government of the region.
Not to mention that Iraq will reduce its oil production by about 189 thousand barrels per day, according to the agreement of OPEC, as from the beginning of January of the new year, and if we take another factor, which is the expectation of a decline in world oil prices due to the expected global economic recession, as a result of the economic war between America and China, and the great tension between America and Iran, the government’s task of maximizing budget resources will be almost impossible.
As for the volume of external and internal debts, which amounted to about 130 billion dollars, in addition to the great benefits that are constantly increasing on these debts, it has been allocated about 20 trillion dinars from the budget to pay these debts.
The government stands almost incapable of tackling these big budget problems, and will have to deal with its huge deficit to take measures, including resorting to loans already existed in the budget, and to the financial liquidity in the Ministry of Finance, and the remainder of the deficit will inevitably be large and will remain until the end of the year .
Especially in the midst of difficult economic and political conditions, and the suffering of the Iraqi people due to the apparent lack of basic sectors, despite the huge oil wealth.
This situation negatively and significantly affected the existing economic situation, as we know that economic operations work better with the availability of stability in the economic environment, and in the absence of this situation, the dealers (sellers or buyers) will bear higher costs as a result of the existing risks and the matter gets worse.
All countries and other oil-producing countries , which have a good economic organization, are working to develop investments, and plan a decent living for the citizen and for future generations, because oil does not constitute more than 35% of its gross domestic product, and 40% of the revenues of the state’s general budget, while Iraq ( Oil constitutes 65% of the gross domestic product, and 95% of the state’s general budget revenue).
The World Bank in its report indicated the continuation of economic growth in Iraq in 2020, reaching a peak of 5.1% before falling to 2.7% in 2021, but he warned the Iraqi government of waste in spending, at a time when the public budget expects a 27% increase in spending on the annual basis, due to large increases in the public sector wage bill, transfers, goods, services, and allocations to the Kurdistan Regional Government.
The bank notes that the widening budget deficit involves more limited resources, devoted to reconstruction efforts and to mitigate any possible drop in oil prices.
And the next Iraqi government must work to develop a plan to develop oil revenues in industrial and agricultural investment, and get out of the restrictions of the rentier state to build a strong modern country, whose people live with economic prosperity commensurate with their (wasted) and stolen wealth.
The bottom line, the Iraqi government must resort to several measures to avoid these problems, the most important of which are:
-The government should also provide job opportunities in the important economic sectors in the economy, whether in the public or private sector, and emphasize the development of other economic sectors other than extractive ones, especially the development of small and medium enterprises to advance the local sector.
– Using the principle of justice in distributing oil wealth to the people, and not according to partisan interests and political agreements.
– Achieve justice for all Iraqis with the same rights in terms of financial entitlements, especially taxes, fees, and water and electricity wages.
– And most importantly, the border outlets, especially the oil export ports in the south, must be secured, as they represent the only economic nerve, representing 99% of the Iraqi state’s revenues.
Economic Studies Unit
Rawabet Center for Research and Strategic Studies