The Iraqi economy and the volatile oil market

The Iraqi economy and the volatile oil market



Highlighted the Iraqi economic expert, Haider Hussain Al Tohme, the light on the troubled and said oil prices that falling prices in its third entered amid receding hopes for a recovery in the markets and the return of prices to standard levels before the June 2014 while coincide with the entry into force of reduced crude oil agreement from both inside and outside OPEC to control the pace of supply and absorb the surplus.

Says the tastes, ... nevertheless, still Brent crude prices oscillating around the rate of (50-55) dollars a barrel under pressure from oil shale return to previous levels and a rise in global strategic reserves and the modest global oil demand growth rates.

In the oil countries, raise fiscal deficits accumulated into question the ability of these economies to withstand and cope with the low oil price especially as it relies on the oil resource in the financing of the budget and the development of the economy on the one hand and weak expectations about the return of prices in the previous levels on the other.

In Iraq, the trend of crude oil prices, pushing the country towards the steep part of the crisis, due to excessive dependence on oil and the weakness of the government's policies in the generation of alternative financial resources contribute to cover the growing public expenditures as a result of the war on Daesh and the failure of the humanitarian costs and the collapse of the infrastructure.

It can monitor the main challenges surrounding the Iraq opportunities to pass the current financial crisis: B

1. The decline in oil revenues due to the deterioration of oil prices and Iraq's entry in the new oil agreement to decrease the production of the country, including more than 200 thousand barrels per day.

2. The weakness of the central government in addressing the resistance arising from the mobilization of sovereign financial resources, such as taxes, fees and others. The government has failed to implement many of the tax laws that began during the years 2016 and 2017 due to obey the wishes of the traders and the powerful and weak law enforcement in the country.

3. General inflation consumer spending and the government's failure to control the sources of financial waste due to a collision with a political and partisan interests of a well-established social and privileges led to reduced benefits of functional grades and special integration of some ministries and government bodies surplus.

4. Iraq sliding into the trap of debt again after difficult negotiations ended the legacy of debt accumulated in the era of the former regime. The total public debt has accumulated again in the country to touch the threshold of $ 100 billion over the past three years alone, knowing that Iraq had achieved a financial surplus of $ 18 billion boat until the beginning of the year 2013.

5. The absence of an appropriate investment climate to attract foreign investment and stimulate domestic investment to take advantage of major investment opportunities in the country, it is due in the basis of the deterioration of the security situation and the lack of government vision in the provision of laws and legislation stimulating as well as the lack of adequate infrastructure for the launch of special projects.

6. outbreak of the financial, administrative and political corruption within the most spectacularly government episodes, especially with a grotesque political competition on ingestion and potential of state resources in favor of strengthening and empowering the ruling parties in the acquisition of power.

7. exacerbate unemployment rates horribly, reached nearly 30% of the total workforce, which increases the risk of deterioration and contraction of domestic economic activity and portends a decline as well as exchange and movement of trade and increases the growth of manifestations of violence and engage in crime for financial reasons.

The expert considers that count on the recovery of oil prices in the global markets to provide the necessary funding for the budget and the economy is a fragile pillar threatens the overall economic activities in Iraq, especially with the harbingers of recession, the global economy and weak expectations about the return of prices to the levels of pre-collapse under the constant dumping of oil markets. The continued price decline in oil prices to double the burden on the shoulders of the national economy, in conjunction with multiple internal burdens, the most important security and political turmoil. However, the adoption of prudent economic policies have turned challenges into opportunities for the restructuring of the economy and break away from the rentier model of growth in favor of diversification of the productive base and promote economic growth and sustainable stability.

It must be recalled, before the signal required for economic policies, that the success of any of the economic reforms depends on the will and the seriousness of the ruling political parties to initiate the development and construction of the Iraqi economy, because they represent machine legislation and implementation of economic decision in the country.



Among the most prominent solutions put forward in this context is posed:

1. feminine public expenditure: the most prominent reasons for the ongoing excessive public expenditure during the previous years due to high oil prices and the lack of proper planning and control, at the expense of the establishment of a sovereign wealth fund similar to the Gulf countries in preparation for the financial crisis, the oil shocks experienced by the oil countries constantly.

2. The diversification of government revenues: discloses the experience that the government is unable to diversify the budget does not tax nor activate the public sector companies and through government departments revenues and to the weakness of the rule of law and not the central government's ability to apply the law in force to the region, pushing central and southern governorates not to to comply with government laws on taxes and customs tariffs and legislation unless adhered to by the province first, it has been repeated this case for years.

3. Encouraging the private sector: Efforts are being made in order to stimulate the private sector starting because of its pivotal role in absorbing labor and moving all the stagnant economic sectors, and the Council of Ministers announced more than once seeking to overcome all the obstacles that hinder the start of the private sector and taking the leading role in development and absorption of labor and the diversification of the Iraqi economy, but without proper security and the development of a stable legal and tax legislation, adequate and effective protection of customs infrastructure, these measures will only be letters of construction far from the Iraqi reality.

4. Adoption of the program budget: one of the main reasons for the Iraqi economy stalled during the previous years, the absence of the economic program for the doors of government expenditure and revenue included in the budgets of previous years. Therefore, it is essential that the next budget includes an economic program that simulates the economic crisis in the country and establishes a new pattern in the economic file management tends to diversify resources and stimulate the agricultural, industrial and tourism sectors of the economy and the promotion of the private sector to reduce the unilateral Iraqi economy and chronic Talh on the oil supplier.

5. not to engage in international loan programs: Most of the experiences of developing countries were not borrowing encouraging and eventually ended the rescheduling of debt and the sale of public sector and national wealth for foreign companies, and believes that there is a conspiracy to seize Iraqi oil by giant companies, especially after they have suffered from the difficulty with the Iraqi negotiator, in the center. So be wary of international borrowing and the benefits high for fear of falling into the trap of indebtedness and its serious economic consequences.

6. The use of the institutions of international auditing and oversight is far from the political consensus and quotas, in order to detect the files of corruption and the organization of exchange operations expenses and the awarding of contracts in a transparent manner.

7-reform of the banking system and enact laws deterrent to the work of banks in the country to transform private banks to bridges for development and finance offices not to money laundering and the smuggling of the dollar.

8. The removal of senior economic positions in the country from quotas and favoritism is the most prominent of the Iraqi Central Bank and Ministry of Finance and the Ministry of Planning and the Ministry of Commerce and the Ministry of Industry and the Supreme Investment Authority, and that it was not possible at the level of ministers do not dress to be at the level of agents, consultants and general directors.

9. full coordination with the Ministry of Higher Education and Scientific Research institutions in supporting and assigning the work of all ministries through joint cooperation in order to lend the scientific aspect in state institutions management and providing them with the latest reached by science and technology, as well as to ensure that the ministry's output within to secure the jobs of the labor market requirements necessary for graduates.

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