Parliament is unaware of the details of the 2025 budget and fears of a “shock” in oil prices

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[size=52]Parliament is unaware of the details of the 2025 budget and fears of a “shock” in oil prices[/size]

[size=45]The 2025 general budget file has become ambiguous, pushing its schedules to an unknown fate despite the vote on a three-year budget last year that included the years (2023-2024-2025), while the Finance Committee in the Iraqi Council of Representatives expects the budget schedules to arrive before the end of this year.
Article 77/Second of the Federal General Budget Law No. 13 of 2023, which regulates the preparation of the three-year budget, stipulates that “the government shall send the budget schedules for the years 2024 and 2025 to the Council of Representatives for approval before the end of the previous fiscal year.”
Last week, a statement by a member of the Parliamentary Finance Committee, Jamal Kojer, sparked controversy after he confirmed that the Council of Representatives had not reviewed any of the details of the 2025 budget schedules, and does not know the size of the budget, the percentage of the deficit in it, the projects it includes, and other financial issues.
Schedules may arrive by the end of 2024
In contrast, member of the Parliamentary Finance Committee, Moeen Al-Kadhimi, expects the government to submit the 2025 budget schedules to the House of Representatives before the end of the current year 2024.
Al-Kadhimi says, “The schedules will be presented in the context of the 2024 experience, and the Ministries of Finance and Planning can present visions through spending in the operational and investment fields.”
“The budget schedules must be realistic and far from illogical increases, and governed by oil and non-oil revenues,” according to the member of the Parliamentary Finance Committee.
Al-Kadhimi explains, “The 2025 budget must be appropriate with the size of revenues or an increase of 10 percent,” estimating “the size of oil and non-oil revenues at 150 trillion Iraqi dinars.”
On October 21, 2024, the head of the Parliamentary Finance Committee, Atwan Al-Atwani, expected that the 2025 budget tables would reach the House of Representatives early next year, noting that “the oil dispute with the Kurdistan Region is one of the most prominent problems facing the preparation of next year’s budget.”
The hypothetical deficit is 64 trillion
For his part, the financial advisor to the Prime Minister, Mazhar Muhammad Salih, believes that the constants of the general budget are the same, as the higher oil prices and the stronger non-oil revenues from fees, taxes and wages, the deficit will remain precautionary.
“As is known, submitting estimates of the federal general budget tables for the year 2025 is stipulated in Article 77/Second of Law No. 13 of 2023, the three-year budget (2023-2024-2025),” says Salih.
Saleh added, “The above law adopts basic constants for the three years, including the fiscal year 2025, including setting the hypothetical deficit at about 64 trillion dinars, with a spending ceiling of about 200 trillion dinars.”
Since oil revenues constitute about 90% of total annual revenues, the price of a barrel of oil was adopted for the purposes of calculating oil revenues in the budget at about $70 per barrel, with an export rate of 3.4 million barrels per day, according to the government advisor.
Saleh believes that “during the implementation of the budget law for the past two years, it can be said that the 2023 budget was mostly balanced if the average barrel of oil sold was around $83, and this year some short-term supplementary assumptions were made which are around 3% of the GDP, which is considered normal in financing a partial deficit and it is expected that the average annual barrel of oil sold will reach around $75.”
Regarding the 2025 fiscal year, Al-Sudani’s advisor confirms that “the issue has not changed much, as the constants of the general budget are the same. The higher the oil prices and the stronger the non-oil revenues from fees, taxes and wages, the deficit will remain a precautionary measure only.”
With the presentation that oil price forecasts for 2025 indicate the possibility of a significant decline in prices due to the abundance of supply, Saleh notes and adds, “The US Energy Information Administration (EIA) expects the average price of Brent crude to be around $79 per barrel, reflecting relative stability compared to 2023 prices. This stability is linked to an expected balance between global supply and demand.”
The Prime Minister’s financial advisor had previously warned on October 10, 2024, that Iraq may face a financial crisis in the 2025 budget due to the continued decline in oil prices, which is the country’s main source of revenue.
In mid-July, the issue of forgery or manipulation of the 2024 budget tables was raised between the House of Representatives and the Prime Minister’s Office, which sparked controversy and conflicting statements and correspondence between the two parties.
Will the 2024 scenario be repeated?
In turn, economic researcher Diaa Al-Mohsen believes that the 2024 budget scenario will not be repeated with the 2025 budget, as the current year’s budget witnessed political differences and accusations of manipulation.
“The deficit in the 2025 budget will be parallel to the deficit in the 2024 budget,” says Al-Mohsen, adding that “the size of the increase is represented by operating expenses, as 60% of employees’ salaries are included in operating expenses.”
The economic researcher points out that “Iraq suffers from a problem that lies in the lack of diversification of revenues,” stressing that “90 percent of Iraqi revenues depend on oil alone.”
“The government must diversify revenues and not rely on oil,” says Al-Mohsen, warning that “any shock in the oil market will push the Iraqi economy into the abyss.”
Regarding the delay in the 2025 budget schedules, the economic expert believes that this delay does not affect employees’ salaries, as it is a three-year budget and salaries are secured.
It is noteworthy that the House of Representatives voted on June 12, 2023, on the federal budget law for the years 2023, 2024 and 2025, worth 197 trillion and 828 billion dinars, with a financial deficit of 63 trillion dinars, or about a third of the budget.
The three-year budget version included many articles related to foreign borrowing, including continuing borrowing according to previous agreements, in addition to new borrowing from international institutions and various governments. Some borrowing values ​​amounted to more than 3,000 billion dollars.[/size]
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