World oil prices have slowly crept back up in recent months. A barrel of oil is selling for around $70 per barrel on international markets. Iraq crude sells at a lower price, but it has been going up as well, along with exports. Baghdad is hoping that if the trend continues, the government will be able to pass a supplemental budget later in 2009 that will help alleviate some of the country’s financial problems.
At the beginning of April Iraq passed its 2009 budget. The budget went through three revisions before it was finally passed, and was still expected to run a $20 billion deficit. That was because it was based upon 2 million barrels a day average in exports and a $50 a barrel price, neither of which Iraq was achieving at that time. By May the Oil Ministry claimed Iraqi crude had reached the $50 mark, but was still only selling 1.905 million barrels a day. To make up the difference the Finance Ministry took out a two-year $7 billion loan from the International Monetary Fund.
The budget crunch is being felt already in the provinces. At the end of May, Maysan officials announced that they were going to run a deficit in 2009, and had no new money for development projects. They were looking for outside investment to fund growth. At the beginning of June, IraqSlogger reported a similar situation in Basra. The head of the reconstruction committee there said they too had no money for new projects, and were short about $84 million for what they needed.
With oil prices going up, Baghdad is now more optimistic about its money problems. Prime Minister Nouri al-Maliki recently said that he was hoping that the central government could pass a supplementary budget later this year if Iraqi crude continued to accrue in price. That would hopefully add much needed money to the ministries and provinces, all of which have had to cut their budgets. Of course, there’s also the issue of spending their funds, something Baghdad and the provinces still struggle with.
Iraq needs billions of dollars to improve its governance, services, and economy. U.S. reconstruction is coming to an end, so Iraq is increasingly on its own to provide money for development. The 2009 budget problems then, come at a bad time. Even if Iraq is able to meet its oil production and price goals, it will still be in debt to the IMF, and many of Iraq’s provinces will be left wanting until if and when a supplemental budget is passed. That will mean much needed rebuilding will be delayed.
Abdul-Zahra, Qassim, “Iraq passes sharply reduced budget for 2009,” Associated Press, 3/5/09
Agence France Presse, “Iraq presidency approves slashed budget,” 4/3/09
Aswat al-Iraq, “Finance ministry to sign new agreements with IMF,” 5/27/09
- “Increase in oil exports contributes to budget balance – ministry,” 6/2/09
Iraq Directory, “Maysan province seeks to attract foreign investment to compensate the fiscal deficit in budget,” 5/30/09
- “New supplementary budget with the rise of oil prices,” 6/10/09
IraqSlogger.com, “Basra: Moritorium on New Development Projects,” 6/3/09
Reuters, “As oil prices rise, Iraq nurtures budget hopes,” 6/8/09