Saleh: Iraq's financial policy good but it is not effective in the long run

Saleh: Iraq's financial policy good but it is not effective in the long run

10/23/2013 12:00 AM




He said that the budget is part of the five-year plan and not vice versa

Baghdad - Mostafa Hashemi

Saw Mokhtassan in the economic necessity of making fiscal policy and a clear long-term in order to achieve the goals set for the budgets of the country's public and take measures hedging to reduce the impact of fluctuations in oil prices on the budget with a supplier sole stressing at the same time the importance of diversifying their resources from other productive sectors is oil.

In this regard, said economic expert, Dr. Mohammed Saleh appearance: that Iraq's fiscal policy is a good policy in the short term and ineffective in the long run to failure to diversify the resources of the budget.

He told the (morning) that the success of fiscal policy is to stabilize and diversify revenue and clarify its goals to reduce the unemployment rate or increase the standard of living of the citizens, pointing out that the economic analysis of the budget weak in terms of duty to pursue the goals set for the budget according to fiscal policy. He said the same reservation budget ceiling of my spend is to draw the deficit or reduce government expenditure, which is the most in the door of budget expenditures, stressing that the budget must be part of a five-year plan and not the other way around to prevent any erosion in the process of economic development.

Precautionary funds

He said the establishment of funds submersible, to be financed from funding sources are known, represents one of the options hedge to the volatility of oil prices and must sustain the existence of the money in this fund ceiling allotted where he assists in the implementation of investment projects in the event of any sharp fluctuations in oil prices affect the investment budget.

Bumper financial

He stressed that Iraq carried out bumper financial draw deficit 20 percent or more in موازناته public. To ensure that reflect spending policies and tax average revenue in the long term see the counselor Iraqi Institute for Economic Reform, Dr. Ahmed al-Husseini he can for financial authorities to adopt specific rules to deal with fluctuations in international prices for natural resource , this boot in estimating income from the export of natural resource that would allow financial authorities in the countries of oil revenues necessary amount of those resources and revenues that can be spent safely through the annual budget.

Sticky unilateral

He told the (morning) that Iraq adopted installed dynamically unilaterally to estimate the financial resources derived from the production and export of crude oil adoption default price for a barrel of oil produced and the source of 90 dollars per barrel, but even under the rules of the boot price, may still be revenue associated with vendor natural jump or landing record levels following the occurrence of any significant changes and sudden in the prices of these natural resources and could lead to increases or decreases a great interview on the side of public spending, which is very correlation and sensitivity to changes in the revenue side, especially those relating to income derived from the export of natural resource Even though a boot base prices.

Restrictions on spending growth

The chancellor said that in this case the economy could find it difficult to absorb these increases and / or reductions in public spending, and to control the volatility of spending more can be completed as part of the base boot place additional limits on spending growth from year to year.

Average oil prices

He pointed out that Iraq has a great opportunity to benefit from the experiences and models of some countries to get rid of the problem (trick fiscal policy), for example, Mongolia using moving average metal prices range (16) years (prices of twelve years and prices projected for the current year and the next three years) and the assumption of this technique or a heavy load version of the previous rates provide stability in forecasting revenues while allowing a gradual integration of forward-looking price expectations.

And between either Mexico relies base preliminary based on the average oil price over the ten previous years (weight weighted rate of 25 percent), and the prices of futures for oil in the short term (weight weighted rate of 50 percent multiplied by the factor caution), and the prices of futures in the medium term (weight weighted 25 per cent), and responds this specification more to changes in the general trends of the prices expected, either factor caution is (relative marginal sales revenue from natural resource), it makes the base primaries more conservative and limit the level of spending and working كمصد insulating effects of the unexpected and caused by potential fluctuations Violent prices.

Avoid sudden interruptions

He concluded by saying: From this point can fiscal policy Iraqi use one of two methods mentioned to avoid interruptions surprise in government spending or tax increases unexpected, if any, after the depletion of the natural resource (oil) and this is definitely the best of the adoption of price precautionary barrel of oil source and follow the so-called policy of non-prosecution international prices of crude oil, equal design fiscal policy under these conditions with government budgets to the depletion of natural resources and its revenue has declined gradually.

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No time to read this but bet Saleh, points out much.... ;)