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[size=32]A sharp drop in Iraq's oil revenues and looming economic challenges[/size]
Two Days Ago
And you are Arabic
Two Days Ago
The Iraqi Oil Ministry announced on Friday, May 1 (May), that Iraq’s imports of oil sales decreased to about 1.4 billion dollars, due to the drop in global oil prices, as well as the decrease in demand for it, which raises questions about how to overcome the financial crisis that the country is going through. The production cut, which came into effect, remained in effect early this month.
According to the statement of the Iraqi Ministry of Oil, the total daily average of oil exports in Iraq during the month of April (April) last, 3.43 million barrels per day, while the total revenue achieved in this month was 1.4 billion dollars, a decrease equivalent to 1.5 billion dollars from last March .
The statement pointed out that "the average price per barrel was 13.801 dollars, a difference of 49 percent compared to the price of the month of March, as the average price per barrel was estimated at 28 dollars.
Perhaps Iraq’s almost total dependence on oil as a main source in supplying its annual budgets complicates the possibility of the country coming out of the brink of economic collapse in the event that global oil prices do not recover, which seems unlikely from economists ’viewpoint, at least until the end of this year.
Parliamentary economic committees draw several scenarios to overcome the financial crisis that the country is going through, in light of the continuous outbreak of the Corona virus, most notably the sale of treasury bonds and the Iraqi dinar rate against the dollar or the printing of cash, in addition to reducing the salaries of government employees to the limits of 30 percent, except that those The measures will also lead to major economic problems, including the devaluation of the Iraqi dinar and the weak purchasing power of citizens, especially for the poor classes.
Reducing production costs
The cost of oil production varies between four and nine dollars per barrel, which goes to the producing companies, while the Iraqi government seeks to reduce that percentage, given the economic situation and low oil prices to large limits.
The Ministry of Oil announced last month that it was seeking to negotiate with foreign companies operating in Iraq to reduce oil production costs, as part of its measures to face the repercussions of the crisis facing the oil market.
To that, Reuters news agency revealed on Friday, sources in the oil sector, saying that "Iraq will face difficulties to reduce oil production at a record rate of one million barrels per day, or 23 percent, starting in May, within the framework of OPEC agreement with Russia and other producers, and that Baghdad has not yet reached an agreement with international oil companies on the whereabouts of the cuts.
And producing major oil companies such as "BP", "Exxon Mobil", "Lukoil" and "Eni", the lion's share of Iraqi production, and so far rejected calls to reduce, prompting Iraqi officials to review options such as asking companies to It creates field maintenance works.
"Reducing the cost of production is a difficult issue, because the global production companies refuse this," said Hamza Al-Jawahiri, a specialist in oil development and production.
He added to “The Independent Arabia”, “The development of oil fields takes place according to contracts, and takes about 4.5 dollars a barrel, while the cost of production is about four dollars per barrel,” noting that “Iraqi oil fields are still under development and these are additional costs, but stopping them reduces Corporate profits and this is excluded. ”
He pointed out that "the quantities of global consumption of oil decreased by 20 percent, and some reports indicate that the decline amounts to about 40 million barrels per day, therefore the decline in the level of global demand cannot be controlled."
He said that "going to a level of reduction above 10 percent may contribute to recovering oil prices," expressing his belief that "the reduction must reach the limits of 20 percent or higher to contribute to the rise in oil prices globally."
He believed that "the addition of the Kurdistan region's oil production to the oil fields in the south, led to an additional reduction in the share of Iraq, which amounted to 28 percent," noting that "the federal government does not take anything from the region's oil."
He continued, "America can give Iraq part of its stalled share to increase Baghdad's share of production, but there are no serious efforts in this context."
Finance and crisis solutions committee
In a related context, the head of the Finance Committee in the Iraqi parliament, Haitham al-Jabouri, said in a television interview, “The country may get 25 percent of the revenues of 2019 in 2020, and we need annually 138 trillion dinars, equivalent to $ 110 billion to meet all expenses, and we also need To 97 trillion dinars, equivalent to 81 billion dollars, to secure salaries and pay external debt only. ”
He added, “The necessary expenditures in Iraq amount to $ 72 billion, related to employee salaries, social welfare and other expenses.” He pointed out that “Iraqi oil is currently sold at $ 16, half of which goes as extraction cost.” He indicated that “employee salaries are secured in May. ”
Al-Jubouri suggested four solutions to secure a monthly fund that includes seven billion dollars by "taking advantage of the state's cash that is available in the Rafidain Bank and the Iraqi Trade Bank, and we have a deposit of four billion dollars to buy weapons from America, we can negotiate and take half of it, and also it is possible to negotiate with the bank International is to borrow $ 2.2 billion, and these options are likely to solve the salary problem for the next four months. ”
He revealed that "salary insurance only requires the sale of a barrel of Iraqi oil at 31 dollars, while insurance of all expenses requires selling it at about 71 dollars."
He pointed out that "border crossings can save the budget eight billion dollars, but what we get half a billion because of corruption and illegal outlets. The reserves of hard currency in the central are 81 billion dollars, and 52 billion dollars remain in all cases to preserve the value of the Iraqi currency. And if we use storage, we should not exceed this number, and if we tamper with it, the Iraqi currency may be exposed to a great danger that causes it to collapse, as happened in Lebanon.
Operating expenses inflation
As for the economic specialist, Majed Al-Suri, he said from his side that "everything that is being talked about does not solve the problem that mainly relates to inflation of operating expenses, specifically the item of allocations and benefits."
He revealed to "The Independent Arabia", that "the total operating expenses, according to what is rumored, amounts to 68 trillion dinars, or approximately 55 billion dollars." The basic salaries without allocations constitute 14 trillion dinars, and allocations 28 trillion, in addition to the benefits that amount to about 30 trillion dinars.
He considered that "the problem is not with scarcity of resources, but with misuse since 2003, in light of the huge waste of money."
On the solutions to the economic crisis that the country is going through, Al-Suri explained that "a number of measures that can be taken, including reducing operating expenses, increasing taxes and borrowing."
He pointed out that "borrowing may solve part of the problem, but it is a difficult issue, as Iraq cannot borrow due to corruption and confusing political conditions", adding that "the biggest proof of this is the Kuwait Conference grants amounting to approximately $ 30 billion, but it was not implemented as a result Corruption and the political situation.
He expected that "this collapse in oil prices will cause a very large collapse in the Iraqi economy, if no measures are taken to recover the stolen money and control the financial expenditures within the available limits."
Central bank procedures
On the performance of the central bank in light of the financial crisis, Al-Suri pointed out that "the central bank maintains the prices of the local currency, despite the chaos and the failure of financial policy, but monetary policy has succeeded so far in contributing to the stability of the currency, which is a type of economic stability."
And considered the talk about reducing the price of the local currency against the dollar "an unforgivable crime against the Iraqi people," noting that it "reduces the purchasing power of Iraqis and increases the suffering of the poor classes and those with limited income working in daily wages and free works, and leads to higher prices."
He pointed out that "the law does not allow the central bank to directly lend to the government, even indirectly because its capabilities are limited, but it can play a major role in activating economic development as it did in 2014 when it gave six trillion dinars in loans to specialized and private banks, noting that" borrowing to cover Operating expenses mean a major collapse for the bank and the Iraqi economy.
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