Oil volatility widens fears of financial crisis, Sudani advisor ‘worried’ about 2025

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[size=52]Oil volatility widens fears of financial crisis, Sudani advisor ‘worried’ about 2025[/size]

[size=45]The circle of fears in Iraq has expanded, of entering a financial crisis, and what raised more “concern” was the prediction of the financial advisor to the Iraqi Prime Minister, Mohammed Shia al-Sudani, Mazhar Salih, of entering a financial crisis next year, 2025.
He said that Iraq will face a budget crisis in 2025 due to the decline in oil prices, the main source of the country’s revenues.
Salih added in an interview with Reuters, late on Monday evening: “We do not expect major problems in 2024, but we need stricter financial discipline in 2025.”
Iraq is the second-largest producer of crude oil in OPEC, with an average daily production of 4.6 million barrels per day under normal circumstances, away from production cut agreements. Iraq’s crude oil exports averaged 3.48 million barrels per day (bpd) in July and 3.41 million bpd in June, while on Sunday it announced plans to raise output to 6 million bpd by 2028. Iraq, OPEC’s second-largest oil producer, relies heavily on oil revenues. The hydrocarbon sector accounts for the vast majority of export earnings and about 90 percent of state revenues. This heavy reliance on oil makes Iraq particularly vulnerable to fluctuations in global crude prices. Still, Iraq has raised its 2024 budget even after record spending in 2023 when more than half a million new employees were hired in the already bloated public sector and a massive infrastructure upgrade began across the country. The
2024 budget rose to 211 trillion dinars ($161 billion) from 199 trillion dinars ($153 billion) in 2023, with a projected deficit of 64 trillion dinars, Salih said. The government’s budget forecasts oil prices at $70 a barrel in 2024, about $6 less than the average price this year. Salih added that paying salaries and pensions on time remains a top priority. Salaries and pensions cost 90 trillion dinars ($69 billion), more than 40 percent of the budget, and are a key factor in social stability in Iraq. “The government will pay salaries even if it costs it everything. Salaries are sacred in Iraq,” he said.
He said infrastructure development could focus on more strategic projects, such as major roads and bridges in the capital Baghdad, if the country finds itself in a financial crisis. Iraq is trying to improve its financial situation by increasing non-oil revenues through better tax collection, but is not considering any new taxes, he said.
Salih estimated that Iraq loses up to $10 billion a year due to tax evasion and customs problems.
For his part, economic researcher Ahmed Sabah said that the drop in oil prices to below $70, with Iraq’s commitment to its production level pledges to OPEC and reducing it to 3.3 million barrels per day, will lead to major negative results.
Sabah pointed out that monthly oil revenues have declined to nine trillion dinars, eight trillion of which will go to finance employee salaries, while the remaining funds will be allocated to cover the expenses of oil licensing companies, finance ration card items, and other operational and investment expenses.
Concerns over the 2025 budget reflect challenges facing the global oil market.
Oil prices have been on a downward trend since mid-2022, with Brent crude falling from over $120 a barrel to below $75 in the past few days.
The decline is largely due to weak global demand, especially from China, the world’s largest oil importer, as its economic growth slows.[/size]
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