How much is Iraq's external debt in light of the fluctuation in oil prices?

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[size=52]How much is Iraq's external debt in light of the fluctuation in oil prices?[/size]

[size=45]With the fluctuation of oil prices, which recently reached less than $70 per barrel, and fears that Iraq will resort to external borrowing to cover the deficit, talk has returned about Iraq’s external debts.
The financial advisor to the Prime Minister, Mazhar Mohammed Salih, said that Iraq’s external debts due do not exceed ten billion dollars.
Salih explained that “Iraq’s external debts due do not exceed ten billion dollars, and there are financial allocations in the federal general budget to extinguish them.”
He added that “the external debts are from the settlements of the Paris Club agreement debts and date back to before 1990, whether for the foreign private sector or sovereign debts, and they must be extinguished by 2028.”
Salih stressed that “the smallness of Iraq’s external debts made it highly creditworthy, which is classified by companies such as the American SNB.”
In 2004, the Paris Club wrote off about 80 percent of Iraq’s debts, which amounted to $120 billion, during the period of the former regime.
Iraq continued to borrow internationally after 2003, especially during the oil price collapse that coincided with security operations against ISIS in 2014, in addition to domestic borrowing to cover the country's general budget deficit.[/size]
[size=45]On September 11, the economic advisor to the prime minister, Mohammed Shia al-Sudani, acknowledged that Iraq faces a budget crisis in 2025, due to the decline in oil prices, the main source of government revenue.
Iraq, the second-largest producer in OPEC, relies heavily on oil revenues, and the hydrocarbon sector accounts for the vast majority of export revenues and about 90 percent of state revenues. This heavy reliance on oil makes Iraq particularly vulnerable to fluctuations in global crude prices.
On May 23, the government’s financial advisor, Mazhar Mohammed Saleh, confirmed that “Iraq has moved towards borrowing from the domestic banking market to finance two waves of deficit in the general budget that came under the influence of the decline in the oil assets cycle and in two different periods during the current decade,” indicating that “the first wave of borrowing, which amounted to nearly 27 trillion dinars, was financed by the government banking system through its purchase of treasury transfers during the intensification of the security crisis (the entry of ISIS) between the years 2014-2017, as the International Monetary Fund estimated at that time that the deficit gap in the current account of the balance of payments due to the decline in oil prices was no less than cumulatively 18 billion dollars during those years.”
The second wave, according to Saleh, “occurred between the years 2020 and 2021, that is, during the health crisis with the spread of Corona and the closure of the global economy, which was accompanied by a decline in oil prices, a decline in budget revenues, and the loss of more than 40% of the value of a barrel of oil, while the legislation of the general budget law for the fiscal year 2020 was absent and was replaced by three legislations to finance the deficit, two of which were for direct domestic borrowing and two separate laws issued by the House of Representatives, by moving towards the domestic borrowing market and the other is the Food Security and Development Law, an important aspect of which was based on domestic borrowing as well, which raised the level of domestic debt to exceed the 70 trillion dinar barrier.”
It is noteworthy that the three-year budget legislation gave the government full legal powers to borrow 41.5 trillion dinars not only in 2023, but also in 2024 and 2025, which means that the government can borrow internally and externally without referring to parliament an amount of 121.5 trillion dinars during the three-year budget and for the three years 2023, 2024 and 2025.
BMI Research, a Fitch Solutions company, raised its expectations for Iraq’s budget deficit in 2024 from 3.3% to 7%, mainly due to the weak prospects for oil revenues, which represent 93% of total government revenues.[/size]
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