Iraq looks to international markets to help finance government

Iraq looks to international markets to help finance government
Iraq looks to international markets to help finance government

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Hind Al Soulia - Riyadh - The Iraqi government asked parliament on Wednesday for authorisation to borrow from international markets to plug what is expected to be a steep budget deficit this year.

Iraq has sporadically resorted to international markets for borrowing since the US-led invasion toppled Saddam Hussein in 2003 and ushered the political ascendency of the country’s Shiite majority.

Official media said the legislature heard on Wednesday the first draft of a new law to let Finance Minister Ali Allawi borrow “from international financial institutions and foreign banks to finance public expenditures”.

A copy of the proposed law said the government is “facing difficulty” in financing its expenses, citing budgetary delays, the coronavirus and a “sharp retreat in oil prices”.

Parliament also ordered the government to present the 2020 budget by the end of this month.

Repeated delays in replacing prime minister Adel Abdul Mahdi since street protests forced him to resign in November last year contributed to the delay, as the authorities, supported by pro-Iranian militias, cracked down on the uprising by killing unarmed demonstrators and committing other violent acts.

A report by the World Bank released in the spring of this year said that if oil prices stabilised in the low $30s a barrel, the Iraqi government would need to raise $67bn in financing in 2020, equal to 39 per cent of gross domestic product, to cover spending.

The oil price is hovering in the high $30s a barrel, having recouped some of its record losses this year. Iraqi parliament figures in April showed that a draft $135 billion budget for 2020 by the Abdel Mahdi government was calculated based on a projected oil price of $56 per barrel, and that the budget deficit, forecast at $40 billion, could more than double to $85 this year.

Mustafa Al Kadhimi, the new prime minister, said he found state coffers empty when parliament approved him as prime minister on May 5.

Mr Al Kadhimi, a former intelligence chief who is supported by Washington, this week ordered unspecified reductions in the salaries of the cabinet and the general managers in the bureaucracy, as well as parliament and the presidency.

The country is one of the top five members of Opec, with oil exports the source of at least 90 per cent of government revenue. Most public expenditure goes on salaries to 7 million public employees.

The new prime minister said he also ordered the elimination of dual salaries, as well as what he described as salaries to fraudulent names on government payroll.

He promised that “solutions to the financial crisis will not be at the expense of limited-income employees, retirees and those who deserve to be on social welfare.”

Updated: June 3, 2020 08:23 PM

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