Falling oil prices threaten Iraqi economic stability and increase social pressures

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[size=52]Falling oil prices threaten Iraqi economic stability and increase social pressures[/size]

[size=45]With the decline in global oil prices, Iraq is facing serious economic challenges that directly affect its financial stability. Oil is the main source of government revenue in the country, and with the decline in prices, Iraq is suffering from a severe shortage of financial resources necessary to finance vital projects, salaries and public services.[/size]
[size=45]This decline greatly affects economic growth and increases social pressures on citizens, which forces the Iraqi government to search for innovative solutions to manage the economic crisis and mitigate its negative effects.[/size]
[size=45]“The drop in oil prices means a decline in the revenues the government receives from oil exports, which leads to a shortage in the funds available to finance public projects and services,” said economic expert Abdulrahman Shaker, adding that “the drop in oil revenues may cause a budget deficit, which may push the government to take austerity measures or borrow to finance its deficit, which may lead to an increase in public debt.”[/size]
[size=45]He added, "The decrease in revenues could lead to a reduction in spending on social services such as health and education, which affects the well-being of citizens and increases social tension."[/size]
[size=45]Shaker continued, “Cutting government spending could negatively impact investment in infrastructure and development projects, which could hinder economic growth and increase unemployment,” noting that “large fluctuations in oil prices could lead to economic instability, which would affect confidence in the local economy and make economic planning more difficult.”[/size]
[size=45]The economic expert called for “the necessity of Iraq diversifying its economy and reducing its dependence on oil by developing other sectors such as agriculture, industry and services.”[/size]
[size=45]The Finance Committee of the Iraqi Council of Representatives confirmed that the salaries of employees and retirees are secured even if oil prices fall below $70 per barrel, while economists indicate that the continued decline in crude prices will increase the budget deficit, which requires searching for new sources of funding other than oil.[/size]
[size=45]For his part, member of the Parliamentary Finance Committee, Moeen Al-Kadhimi, said, “The price of a barrel of oil was calculated at $70 in Iraq’s budgets for the years 2023, 2024 and 2025,” which is less than what is currently sold in global markets, and about 3.5 million barrels of oil are exported daily, which is Iraq’s share in OPEC, on the basis of which Iraq’s oil and non-oil revenues were calculated, which amounted to 147 trillion dinars, and on this basis the upper limit of revenues is sufficient to provide salaries, which amount to about 60 trillion dinars.”[/size]
[size=45]“Therefore, there is no problem in providing salaries for employees and retirees. As long as the global oil markets do not fall below $70, there is a possibility of providing salaries for citizens. However, if something else happens in the global equations, for example, the war in Ukraine stops and the situation in Gaza stabilizes, this may lead to a decrease in oil prices. If it falls below $70, this will affect the general budget, but there remains a wide scope for providing salaries, and there is no problem in this regard,” he added.[/size]
[size=45]He explained that “the current problem is in the cash liquidity in the Iraqi dinar, due to the delay in transfers issued by the Central Bank, which is controlled by the US Federal Reserve, and leads to delays in sending transfers and the lack of liquidity in the Iraqi dinar.”[/size]
[size=45]According to experts, since the beginning of 2024 until this month, Iraq has been selling oil at more than $82 per barrel, so the first seven months have seen at least $10 per barrel in surplus over its budget price, so Iraq has not sold for less than $70 so far. It is true that there is a deficit in the budget, but it is not due to the decline in oil prices or production, but rather it is the result of increased financial allocations in the budget related to salaries and investment expenditures. As for talking about the absence of salaries or a crisis, this does not make sense, because the Central Bank’s reserves are high at more than $115 billion, which secures the local currency. Then, the news in the Middle East is tense, and any spark that occurs will raise oil prices, and this is good.[/size]
[size=45]In the last two days, Brent crude futures fell four cents, or 0.1%, to $76.77 a barrel by 00:35 GMT, while U.S. West Texas Intermediate (WTI) crude futures were at $73.39 a barrel, down 13 cents, or 0.2%.[/size]
[size=45]Despite concerns about escalating tensions in the Middle East, Brent and WTI crude futures fell more than 3% to close at their lowest levels since January on Friday in a volatile week.[/size]
[size=45]Last week, the four contracts posted their fourth straight week of losses, the biggest losing streak since November 2023.[/size]
[size=45]Oil prices fell on fears of a recession in the United States and after OPEC+, an alliance between the Organization of the Petroleum Exporting Countries and other producers such as Russia, stuck to its plan to gradually phase out voluntary production cuts starting next October.[/size]
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