The leaking of the Iraqi Finance Ministry’s draft of the 2016 federal budget last month has set off public debate on issues which are especially poignant, now that ordinary citizens are impacted negatively by government spending shortfalls. A large amount of the $102.6bn budget passed in January for 2015 has not been disbursed, as revenue has fallen short of projections on account of weak oil prices. Spending categories most impacted have been capital investment projects (housing, water projects, etc), provincial funds and salaries for certain categories of workers, mainly those in the Industry Ministry’s loss-making manufacturing firms and contract employees. Regular civil servants in government-controlled areas have received salaries. While the 2016 spending figure of $97.4bn in spending is only moderately more realistic, there is a dramatic change in the proportion of 2016 spending devoted to operational expenses versus capital investment, from $66.5bn to $36bn for this year to $71.3bn to $26.1bn for next year.
One key point of debate is the realism of the budget itself. The draft assumes an oil price of $45/B, but given that Iraq typically sells oil at a discount to Brent prices, there is a good chance this will fall short. Iraqi economist Basim Jamil, speaking to al-Itijah television, referred to the budget’s assumptions as “reckless with the truth,” asserting that the state would struggle to pay salaries without alternative income sources to replace unrealistic oil revenue expectations. Masoud Haidar, a member of parliament’s Finance Committee, called for a reduction of the oil price assumption to $40/B, and for spending projections to be reduced, otherwise he predicts an eye-popping 48% deficit. Mr Haidar’s estimate points to a massive shortfall. Falih al-Sari, another member of the Finance Committee, said that MPs were discussing with the Finance Ministry who it was going to borrow more from abroad, adding that the government had already promised to lower projected spending levels. Another major point of debate is the “petrodollar” program, offering oil producing provinces $1 in extra funding for every barrel of oil or 150 cm3 of gas produced. A 2013 law, passed over the executive’s opposition, raised this figure to $5/B, but it was never implemented due to lack of money. But while the 2015 budget brought it back down to $2/B, the federal government has not been able to afford this lower amount. Nonetheless, the 2016 draft contains the same figure. Shortly after the budget hit the media, Basra’s provincial council disclosed that it had received just $214mn of its petrodollar money for 2015, which is only somewhat more than one month’s worth of payments. This suggested the 2016 figure was not credible. (CONTINUED - 514 WORDS)
