The new price of a barrel of oil and the deficit in the general budget

by **claud39** Sat Mar 13, 2021 2:18 pm

[size=20]The new price of a barrel of oil and the deficit in the general budget

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FRIDAY, MARCH 12-2021, PM 8:53
KARRAR AL-ASADI
478

Written by: Dr. Bilal Al-Khalifa

We talked a lot about the federal budget in the past, and despite that, we were not able to cover all the budget items and issues, due to the many problems that it included.

We talked about the exchange rate of the dollar and the deficit and that it is exaggerated, not real. Indeed, the draft included the amount of the deficit that is much exaggerated, which is 43 billion dollars, but the members of the Iraqi parliament felt that the amount is large and unrealistic, especially since the experience of the reform paper was a lesson in that the deficit is exaggerated (it was The government's estimate of the amount of expenditures that the government needs to borrow to is 57 trillion dinars, but parliament voted 22.5 trillion dinars, so Parliament decided to reduce the deficit to 18 billion dollars.

Today, the price of a barrel of Basra Light Oil reached (70) dollars per barrel, and the price of a barrel of heavy oil reached 65.8 dollars. Therefore, in this article, I wanted to show people two points:

1 - What is the price of a barrel of oil that spares the government internal borrowing

2- How much is the price of a barrel at which we can return the dollar exchange value to its previous era

In the beginning, we must know two things, namely (the amount of the deficit and the price of a barrel of oil approved in the budget). The cut is $ 43 billion, but Parliament decided to reduce the value of the deficit to $ 18 billion. As for the approved value of selling the price of a barrel of oil, it was revised from 42 dollars to 45 dollars per barrel of oil.

Scenarios for the impact of the price of a barrel The

first scenario: a barrel of oil = $ 70

today, and as I mentioned, the selling price of a barrel of Basra Light crude reached $ 70 as I mentioned, so the price difference between the two is $ 25, and therefore the amount of the difference per year is $ 29.656 billion, and in the Iraqi currency, depending on the value Spending approved in the budget, the amount is (43) trillion dinars.

First: The deficit, the
difference, is 11 billion dinars, a surplus, after 18 billion dollars were taken instead of external and internal borrowing.
Second: the dollar exchange rate
. Oil imports at the new price are around $ 83 billion. That is, 120 trillion Iraqi dinars, depending on the current exchange rate, which is (1450). But if we go back to the old price, suppose it is (1200) dinars per dollar, then the value of oil revenues is 99 trillion dinars.

Since the expenditures will be reduced to 127 trillion dinars, the new price will not need to borrow any amount from inside or outside, especially that the budget.

The second scenario: a barrel of oil = $ 65.

If the oil is sold at a price of 65 dollars, that is, ten dollars more than the price approved in the general federal budget, the additional amount that enters Iraq's imports will be 11 billion dollars, or 17 trillion Iraqi dinars.

First: The deficit
we noticed that the additional amount is 11 billion and the deficit is 18 billion, meaning that the difference is 7 seven billion dollars. The amount is not large, and the lending should be carried over to the end of the year because borrowing may not be needed due to the lack or reluctance of some investment programs.

Second: the exchange rate
. Oil imports at the new price are around $ 77 billion. That is, 111 trillion Iraqi dinars, depending on the current exchange rate (1450). If we go back to the old price, let us assume it is (1200) dinars per dollar, so the value of oil revenues is 92 trillion dinars.

The third scenario: a barrel of oil = 70, the amount of oil export = 3 million
that the federal budget includes in one of its items that the region must deliver 250 thousand barrels per day, and as it also stipulated that the daily export amount of oil is 3.250 million barrels, but after subtracting the amount What Erbil will deliver to the federal government becomes the total amount for export is 3 million barrels per day.

The amount of total oil revenues will be 76.6 billion dollars annually and in Iraq, but when the specified exchange value in the budget is adopted, which is 1450 dinars, and thus the value of oil revenues in dinars is 111 trillion dinars,

we conclude

1 - This means that the deficit is 16 trillion dinars despite the high price of oil

2 - the amount What the region exports is 250 thousand and its annual revenues are 6.3 billion annually, or 9.2 trillion dinars, and this amount will be added to the deficit value that was calculated from above.

The fourth scenario: a barrel of oil = $ 65, the exported oil is 3 million barrels per day

, the total return is $ 71 billion, and in Iraq it is 103 trillion dinars, so the deficit for the amount stipulated in the budget is 24 trillion, in addition to the original deficit.

Conclusion:

1 - In the event that the region delivers oil and adopts the current oil prices, borrowing is unnecessary and there is also a surplus of funds.

2 - It is also possible to re-exchange the dollar to the old price if the current price of a barrel of oil is adopted.

3 - In the event that the region does not deliver the oil stipulated in the budget, the deficit will increase.

Result from the above two questions

1 - The current price is sufficient in the event that the region does not deliver the oil, a surplus if the oil is delivered from the region.

2 - The current rate (70) is sufficient to return the dollar exchange rate to the old value.