Year of belt - tightening ahead for Iraqis as oil prices drop by nearly 50 percent

by **Ponee** Wed Dec 17, 2014 8:45 am

The slump in oil prices by nearly 50% since last June has forced the government to revise its 2015 budget several times, introduce new cuts and new taxes.

The draft budget will be presented to parliament for approval this week but Prime Minster Haider Abadi says most figures on allocations based on oil revenues are not final.

The price of Brent crude settled at $61.46 on Friday from $115 in June after OPEC, the oil producing cartel, refused to curtail output and forecasts of even lower prices from the world energy watchdog, the International Energy Agency.

Finance Minister Hoshyar Zaibari says the budget he is presenting to parliament “is a plan for austerity, reduction of expenditures and offsetting” a large deficit.

The budget he has prepared is based on $65 a barrel but crude oil prices have already plummeted below the price on which Zaibari has based his allocations.

In fact, oil is forecast to plummet further and a price of $40 or even below is not unlikely.

Iraqis will have now to deal with economic hardships besides large-scale displacement and destruction caused by the ongoing fighting with Islamic State militants who currently control more than one third of the country.

“For the first time Baghdad will resort to the imposition of taxes on mobile sales in addition to a battery of other taxes to close the deficit,” Zaibari said.

The budget itself is geared to meet the country’s requirements to sustain a military involved in ferocious battles in at least eight of the country’s 18 provinces.

“The largest portion of the budget goes to the military effort and the effort of defending the country,” Zaibari, a Kurd, said. “Salaries have been paid to people’s mobilization (militias supporting the armed forces) but the money has not reached all those enrolled and there are complaints that large numbers have not yet received their salaries.”

In a sign of hard times, the government has asked the United Nations to delay payment of $5 billion to Kuwait as part of 1991 Gulf War reparations.

The government austerity measures call for saving at least $13 billion and borrowing heavily from both state-owned and private banks.

Spending on ‘luxuries’ like furniture, perks and travel will be drastically slashed, according to Saad Haidith, the government spokesperson.

Iraq exports 2.5 million barrels of oil a day and the drop of each dollar in prices means the loss of $2.5 million per day.

There are no taxes on income in Iraq and the country could only collect $1.5. The government is considering introducing tariffs on imports and reducing salaries of high income groups.

Iraq’s annual import bill is estimated at $75 billion. Iraqi Central Bank reserves are huge totaling $70 billion but the government is reluctant to draw on the reserves for fear of destabilizing local currency’s exchange rate.

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Year of belt-tightening ahead for Iraqis as oil prices drop by nearly 50%

by **Saint** Wed Dec 17, 2014 8:50 am

Bad for them and our possible RV but all in all good for us at the gas pumps, but that's about the only benefit for us. So let's enjoy this time and have :kki:

Year of belt - tightening ahead for Iraqis as oil prices drop by nearly 50 percent

Year of belt - tightening ahead for Iraqis as oil prices drop by nearly 50 percent

The slump in oil prices by nearly 50% since last June has forced the government to revise its 2015 budget several times, introduce new cuts and new taxes.

Re: Year of belt - tightening ahead for Iraqis as oil prices drop by nearly 50 percent