Iraq plans to lower the oil price forecast in its 2016 budget to about $32 a barrel from $45, widening its fiscal deficit by several billion dollars, the International Monetary Fund (IMF) and a senior government official told Reuters.
The new price estimate is based on the continued low level of global oil prices in recent months, said Marwa al-Nasaa, Amman-based IMF resident representative for Iraq.
"We're setting it closer to $30 based on the climate of international futures prices since November," she told Reuters on Thursday.
The adjustment is expected to add about $6 billion to the OPEC producer's budget deficit unless offsetting measures are taken, said the Iraqi official, who requested anonymity to speak about ongoing government deliberations.
Iraq's current budget, which projects oil exports of 3.6 million barrels per day, predicts a deficit of 24 trillion Iraqi dinars ($20.56 billion).
The drop in oil prices over the past two years has battered Baghdad's finances as it wages a battle against Islamic State militants in the north and west and confronts a political crisis that threatens to bring down the government.
Iraq, which relies on oil for more than 90 percent of its revenue and sells at a discount to global benchmark crudes, earned an average of $24 a barrel in the first two months of the year and $28 in March, the Iraqi official said late on Wednesday. "We have to rebuild the budget taking this into consideration."
The revised budget, which has not been finalised, is part of Iraq's negotiations for a standby agreement (SBA) with the IMF, the official added. The SBA financing could be approved as early as June, unlocking $15 billion in international assistance over the next three years.
"If an SBA is reached, part of that financing gap will be met by IMF and other donor financing, but it will not close the entire gap," Nasaa said.
"A number of measures are going to have to come from the government itself to increase revenues and bring expenditure in line with the new revenue reality. It has to be a combination of both."
The Iraqi official declined to specify what measures Baghdad would take to reduce the deficit, but said: "It is a must, otherwise we will have to borrow more and more." – Reuters