2024-09-05 07:33:37
Baghdad/Al-Masala: Oil is the main economic backbone of Iraq, accounting for about 90% of government revenue and 60% of gross domestic product. Therefore, any fluctuations in world oil prices are directly reflected in Iraq’s financial situation.
Recently, there has been a significant drop in oil prices, which has led to a significant drop in Iraq’s oil export revenues, raising serious economic and financial concerns.
The prime minister’s financial adviser, Mazhar Muhammad Saleh, warned of “the risks of a decline in oil revenues” due to the decline in crude prices in global markets.
Saleh said, “First of all, there is a need to systematically investigate the underlying causal factors regarding the decline in crude oil prices in global markets and their rapid decline in the past few weeks, as China is one of the largest crude oil importing economy in the world. among nations, as its crude oil imports increase.” About 10 million barrels of oil per day, and Iraq contributes about 10% to meet China’s need for oil, or about 30% of Iraq’s oil exports are directed to the Chinese market. “
He said, “China’s demand for oil is linked to the annual growth rates of its economy, and it is a very direct relationship that the greater the growth of the annual gross domestic product, the greater the demand for crude oil.”
From the second half of 2023, oil prices have started to decrease after a period of relative stability as a result of several factors.
In the case of Iraq, which is heavily dependent on oil exports, this decline had a direct and negative impact, as the Iraqi government’s revenue from oil sales fell sharply, limiting its ability to finance government projects, pay salaries, and cover basic costs.
Iraq, which depends mainly on oil to finance its general budget, faces major challenges in achieving financial balance. Iraq’s budget is based on estimates of world oil prices, and is often based on prices higher than the actual market level, resulting in:
The decline in oil revenue increases the fiscal deficit, which encourages the government to increase internal and external borrowing to finance its spending. With the reduction in government spending on major projects, the jobs associated with these projects are affected, leading to an increase in unemployment rates, especially in the construction and energy sectors.
Saleh said, “Today, September 4, 2034, oil prices dropped significantly, as Brent crude fell below $74 per barrel.” This sharp decline is due to continued concerns about the slowdown in China’s economic growth, which has negatively affected oil demand, adding to global markets’ concerns about continued weakness in global demand for crude oil.”
In conclusion he said, “The matter concerns Iraq, where the general federal budget issued by Law No. 13 of 2023 (the tripartite budget) still hedges a hypothetical annual deficit of about 64 trillion dinars, and a barrel price. Oil revenue for the purposes of estimating oil revenue in the budget over the past year is about $70 per barrel (as an annual average). to maintain spending and in accordance with the priorities and principles set out in the Federal Budget Law itself, whether to finance the deficit or to prioritize public spending.”
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