Iraq knocks on the door of the IMF, requesting a loan of up to 4 billion dollars

The Iraqi dinar and the dollar

The Iraqi dinar and the dollarIraq’s economy

The Ministry of Finance has started the draft budget for 2022, assuming the oil price is at $50 per barrel


Published in: Aug 06, 2021: 4:26 PM GSTLast updated: August 06, 2021: 05:23 PM GST

Iraqi Finance Minister Ali Allawi said yesterday, Thursday, that Iraq recently resumed its talks with the International Monetary Fund to obtain a loan of between 3 and 4 billion dollars, after earlier halting such efforts to secure liquidity.

Talks between the International Monetary Fund and Iraq began last year, amid the pandemic-related demand shock that caused oil prices to fall, but the discussions were postponed as energy markets and the country’s foreign exchange reserves recovered. The government is now proactively looking forward to help cover its budget deficit.

“I don’t think we will reach an agreement with the International Monetary Fund before the end of this year,” Allawi told reporters in Baghdad. “With the October 10 national elections approaching, the government and parliament will be sidelined.”

difficult balancing

The Ministry of Finance started the draft budget 2022 with the assumption of the oil price at $ 50 a barrel, considering that this level is not fixed.

The Iraqi Minister of Finance announced that the 2022 budget, which the ministry began preparing a few days ago, will have a reform dimension, as it “different from previous budgets” and reflects “the reality of Iraq’s obligations.”

He explained that the ministry will seek to submit this new budget to Parliament before the early parliamentary elections scheduled for October, adding that it will be a “reform budget, but it may be politically difficult.”

The minister is likely hinting at the difficulty of passing the new budget due to the high value of the deficit in it, as happened in the previous budget. In the proposed 2021 budget bill, which the government submitted to Parliament, the value of the deficit was estimated at 49 billion dollars. However, the deputies made up the difference by canceling debts and dues from the state, especially dues for Iranian gas and energy, and other payments for infrastructure.

The value of the deficit in the 2021 budget, as approved by Parliament, amounted to $19.8 billion, compared to $23.1 billion in 2019, knowing that Iraq did not approve the 2020 budget due to political tension.

The total value of revenues in the 2021 budget amounted to about 69.9 billion dollars, calculated based on the export of crude oil on the basis of a price of 45 dollars per barrel, and an export rate of 3 million and 250 thousand barrels per day. As for the value of the 2021 budget, it amounted to $89.7 billion, about 30% lower than the last budget approved in 2019.

The Minister of Finance explained that the price of a barrel in the new budget will be 50 dollars, which is an adjustable figure. However, the value of a barrel of oil in the market is currently much higher.

economic decline

Iraq, the second largest oil producer in the Organization of the Petroleum Exporting Countries, is going through its worst economic crisis. The poverty rate in the country has doubled during the year 2020, and 40% of the population of 40 million is classified as poor according to the World Bank, while the Iraqi dinar has lost 25% of its value.

Corruption, which has cost Iraq twice as much as its gross domestic product, or more than $450 billion, is the main concern of Iraqis who suffer from a lack of electricity, hospitals and schools.

However, the minister said that Iraq’s financial situation has improved this year due to “the rise in the price of oil and the change in the exchange rate of the dinar.”

With regard to oil, Allawi believes that the current price levels are good for producers and balanced for consumers. Looking ahead, he predicts that the next battle in OPEC will not be over prices, but over who exports more, and if all members boost exports, prices will surely suffer.

The minister lamented ExxonMobil ‘s withdrawalfrom the country’s energy projects, but said he agreed that the company should stick to its policies.

Iraq is expected to sign an agreement with Total Energies SE before the current government’s mandate expires, although the completion of the contract may extend to the next administration, according to Allawi.

On July 25, the Iraqi Council of Ministers agreed to award Total Energies SE a contract to develop a natural gas field, allowing it to help boost oil production in the country. The French energy company aims to collect and process 600 million standard cubic feet of gas per day from the Ratawi field, according to the government.

As for the agreement that Iraq signed with Lebanon last month to export one million tons of heavy fuel oil annually – the price of which is paid through services and goods – Allawi said that Iraq will look to benefit from the Lebanese expertise in the fields of banking, education and tourism.

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