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[size=30]The economic advisor to Abdul-Mahdi explains: This is what it means to drop oil to $ 30![/size]
Monday 09 March 2020
People - Baghdad
The financial advisor to the Prime Minister, Mazhar Muhammad Salih, on Monday called for the necessity of a quick move towards emergency budget legislation that would provide financial sustainability at the current stage and meet the necessary needs.
Saleh said in a statement to the official agency, followed by "Nass", today (March 9, 2020), that "the drop in oil prices to less than $ 30 for a non-short-term period means, of course, dealing with a major financial-economic shock, based on the absence of important sovereign resources." And depriving the public budget of it, given that the country's budgets depend 92% on oil revenues.
Saleh added, “If the initial deficits indicators estimated in the Federal Budget Law 2020 are taken, which is approximately 50 trillion dinars (after high oil prices have been adopted, which are far away, which is about 56 dollars per barrel of oil produced) and this means That the deficit will rise to double, if the spending ceiling remains in the 2020 budget over its current initial estimates of 164 trillion dinars.
He continued, "The financial deficit of this capacity cannot be funded, especially if oil prices continue to fall below $ 30 per barrel, except by borrowing from international capital markets, or by resorting to agreements with international financial and monetary institutions."
He explained, "Borrowing sums equivalent to the accumulated amount currently from the external debt in particular and by more than 70 billion dollars, closer to the imagination, given the absence of international bodies that offer such loans in the short period, in addition to the absence of economic logic when taking such fictional financial steps, which is an adventure not Commensurate with the sustainability of public debt and its standards in Iraq. ”
He stressed "the necessity of going in the short term to legislating an emergency budget that provides financial sustainability at this stage and meets the necessary needs, foremost among which are the salaries of employees and retirees, social welfare and health life necessities and necessities, and going in the medium term to re-examine all financial laws that burdened the country and its economic future." And establishing a real structure for alternative development of the rentier economy. ”
And held the Iraqi Oil Ministry, Monday, Saudi Arabia and Russia responsible for any collapse in world oil prices, as a result of the parties' insistence on their positions, revealing "Iraqi efforts to bridge the points of view."
The ministry’s spokesman, Assem Jihad, said in a statement, which “people” received a copy of, today (9 March 2020), that “the Iraqi delegation made a great effort to bring the points of view between the Russian and Saudi side at the meeting held a few days ago in Vienna.”
He added, "The meeting was between the oil-exporting countries and the countries allied with OPEC, that is, the non-OPEC producing countries, with the aim of bringing the views between the Russian and Saudi side to reach a fair agreement to face the repercussions of the Corona virus, which led to a decline in demand in the oil markets, and also a decline in development And the economic movement in the world, which caused the decline in oil prices. ”
The statement continued that "the insistence of the two sides, the Saudi and the Russian, on their positions, led to the failure to reach the agreement, and gave a message to the oil markets not to agree, which contributed to the rapid decline in oil prices, as well as Saudi Arabia's announcement of lower oil prices."
The statement warned of "the collapse of oil prices, which will affect all producing countries, including Iraq, and also will affect the world's economies by shrinking investment", pointing out that "Iraq is not the only one affected, as all oil-exporting countries will be affected."
The statement pointed out that "speculation taking place between countries does not serve everyone and all countries must determine production levels to absorb the oil surplus in global markets and restore the balance between supply and demand, and this contributes to high oil prices."
And he stated, "It is not wise for Iraq to pump more oil to the global markets, and it is basically witnessing an oil surplus, pumping more oil will lead to further collapse of its prices," noting that "the ministry's efforts are continuing to communicate with the concerned authorities to reach a formula of an agreement in which The stability of oil markets and limits the collapse.
A spokesman for the Iraqi Oil Ministry revealed that "the agreement to cut production ends with the end of this month." He explained that "Iraq is working to invest time to invite member states from OPEC or from outside OPEC to agree first, and to put an end to the collapse of prices and restore balance to global markets." ”
Oil futures prices fell more than 20 percent to their lowest level since 2016 Sunday after Saudi Arabia lowered the official price for selling crude oil, indicating the start of a price war after OPEC's talks with Russia failed to reach an agreement on reducing production.
On Friday, Russia rejected OPEC's proposal to make deep production cuts in order to stabilize prices hit by the economic consequences of the Corona virus.
Brent crude futures fell $ 9.57, or 21.1 percent, to $ 35.70 a barrel by 2216 GMT, while US West Texas Intermediate crude fell $ 8.62, or 20.9 percent, to $ 32.66.
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