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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again

    Rocky
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    Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again Empty Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again

    Post by Rocky Fri 20 Mar 2020, 2:53 am

     Officials: The Iraqi financial crisis may make us borrow from the International Monetary Fund again

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    Economy News - Baghdad
    Between the fall in crude prices and political volatility, the shrinking international intentions to save it and the new Corona epidemic, Iraq stands on the brink of a financial catastrophe that could push it into austerity measures and re-renew popular anti-government protests .
    But officials seem strangely optimistic, which experts describe as a "denial" given that an expected collapse in oil prices will cost Iraq two-thirds of its net income this year .
     
    Brent crude prices fell this week to $ 26 per barrel, the lowest level since 2003, in the wake of global oil demand affected by the outbreak of the Corona virus, and the price war between major producers Saudi Arabia and Russia .
     
    In contrast, the head of the International Energy Agency, Fatih Birol, says that Iraq, whose oil revenues constitute more than 90 percent of its revenues, will face "enormous economic pressures ."
    Iraq is the second largest oil producer in the "OPEC", and usually exports 3.5 million barrels per day .
    Iraq adopted in its draft budget for 2020 on an expected price of $ 56 a barrel. And with lower prices, Iraq’s net income will decrease by 65 percent this year, compared to last year, causing a monthly deficit of $ 4 billion dedicated solely to paying salaries and maintaining government business continuity .
     
    Birol points out that "in the current crisis, Iraq will suffer to exceed oil revenues of $ 2.5 billion per month," calling on officials to find "urgent solutions." This prediction is based on the price of $ 30 a barrel before the recent decline .
     
    Ways to reduce costs
     
    On the other hand, senior Iraqi officials say to Agence France-Presse that the ministries of finance and oil, the Iraqi Central Bank and state-owned banks are looking at ways to cut costs and find financing .
     
    The Governor of the Central Bank of Iraq, Ali Al-Alaq, explains to the agency that "there is some concern, but it is not severe ."
    "I think oil prices at this level will not last long. We don't expect big spikes, but at the level that secures the required volume, " he says.
    Al-Alaq believes that officials are still closely reviewing the draft 2020 budget, which is one of the largest budgets of Iraq at around 137 billion dollars .
    Over 75 percent of it is earmarked for salaries and other costs, with the remainder being spent on capital investments .
    Total salaries jumped from $ 36 billion in 2019 to $ 47 billion this year, after 500,000 new employees were hired to appease the rising street for months .
    The government employs about four million Iraqis, pays three million of them, and welfare for a million employees .
    The relationship explains that "based on our preliminary indicators, we will be able to cover external debt and salaries", and reduce the benefits and services that "lack economic efficiency ".
    But eliminating any benefits in a time of global economic downturn could put people back on the streets with even greater momentum .
     
    He points out that other options include recovering "trillions" of the Iraqi dinar from accounts in state-owned banks, as the ministries have stored years of surplus funds, issuing bonds to people and rescheduling internal debt payments .
     
    The central bank governor added that new talks are also underway with the International Monetary Fund, but with the absence of a budget and the formation of a new government, it appears that it will not bear fruit .
     
    The government does not plan to devalue the currency, obtain new foreign loans, or stop payments to international oil companies, which are worth $ 1 billion a month .
     
    Al-Alaq was optimistic that the pressures would push the government to introduce long-awaited financial reforms, saying that "a blow that does not break your back will strengthen you ."
    Not optimistic
    On the other hand, some officials openly admit that they do not share the optimism of the relationship .
    A senior Iraqi adviser describes the situation as a "serious crisis", while another says that it will be impossible to reduce the budget in a country that TI ranked 16th on the list of the most corrupt countries in the world .
    "Some ministers oppose cuts because it will penetrate their patronage networks," the chancellor says .
     
    He adds that the government assumes that oil prices will return to normal within two months, which the International Energy Agency did not expect .
     
    In a related context, Ahmed al-Tabaqshali of the Iraq-based Institute for Regional and International Studies notes, "Putting the head in the sand is not politics ."
     
    Although Iraq faced a collapse in prices in 2014 and 2016, it did not witness the current significant decline in global demand, especially from China affected by the Corona virus, the main importer of Iraq .
     
    Reliance on the international community is less permanent than it was in 2014, when world powers were eager to help Iraq fight ISIS .
     
    Tabkashli says that Iraq may have to resort to reserves worth about $ 60 billion to cover the deficit, but it will inevitably have to reduce salaries and perhaps borrow internationally .
     
    Even if the markets eventually stabilize, Iraqi oil will struggle to compete with the abundant Saudi product .
     
    So Tabaqli considers that "there are painful adjustments that we need to make now, not leave them to our grandchildren."

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