Iraq-Business News

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How to Resolve Iraq’s Economic Crisis

The Iraqi government faces a huge budget deficit and is having difficulty running the country’s economic activities because of plummeting oil prices, the heavy burden of the war against the Islamic State and rampant corruption.

Prime Minister Haider al-Abadi faces numerous problems that require immediate attention, such as the public’s anger over austerity measures that hurt ordinary workers. Iraqis are also demanding that the government improve its performance andbring corrupt officials to justice.

It’s not a good time to be the Iraqi premier. The year 2015 started with a budget deficitof $20 billion on a $103 billion total budget. The situation is expected to worsen in 2016, as the Finance Ministry is setting the 2016 budget at $99.65 billion, with a deficit of $25.81 billion.

The estimated 2016 budget is as unrealistic as the 2015 budget. A major part of its funding relies on fluctuating oil revenues, which are expected to reach $55 billion in a best-case scenario. Non-oil revenues are not expected to exceed 10% of Iraq’s total income, based on past years. In some periods from 1921 to 2012, non-oil revenues in Iraq did not even exceed 5% of total income.

Abadi clarified the situation in an Oct. 27 meeting with Iraqi university professors, saying, “Oil revenues are nearing 59 trillion dinars [$53.05 billion]. Deducting the cost of oil production, the remaining amount will be 45 trillion dinars [$40.3 billion]. Salaries and pensions alone require 50 trillion dinars [$44.8 billion]. How will the expenses of war, health, education, agriculture, services, the poor and others be covered?”

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