2016 budget and adapt to the low price of oil

2012 2015
Ahmed Ibrahim Ali
2016 budget issued by the Iraqi Council of Representatives on 16 December expenses estimated at 105.9 trillion dinars, of which 25.7 trillion dinars for investment projects, an increase of 24.3 per cent of the total expenditure, and this amount is not enough to implement the committed projects rates normal for the completion and maturity and requires a fact-finding possibilities to reach it appropriate arrangements. Revenue is estimated at $ 81.7 trillion dinars, of which 69.8 trillion dinars from oil exports, and the rest in non-oil revenues at $ 11.9 trillion dinars. Based oil supplier on the export of 3.6 million barrels a day, from all of Iraq, and at $ 45 a barrel. Thus, the deficit of 24.2 trillion dinars financed by internal loans of 17.1 trillion dinars, and 3.2 trillion dinars from the cash balance of the budget end of 2015, and about 3.9 trillion dinars foreign loans. And internal loans will depend on the central bank's policy is to facilitate liquidity. The budget plan for the year to come has been away, so much Aomak, revenue generated and actual expenditures for estimates and allocations of the budget. Because the oil can not predict accurately the price, and it is difficult for the Advancement of revenue non-oil without action seen by many among the community not to relax, has been described as cruel, Although the outcome is low relative to gross domestic product compared to many other countries, and global averages for middle-income countries.
The size of the tunnels, described above, does not constitute pressure on the local capital goods and services from the energy is below the levels accustomed to the Iraqi economy with evidence that the rate of inflation low and close to zero for some periods. But severe constraint on the national economy is the low amount of revenue for foreign currency compared Bahadjom which prints the Iraqi economy by all sectors. For this reason, the economic policy have to focus on is the sense of the need for foreign currency management and financial dimensions of the crisis, at the government level, and the national economy, as a whole, taking into account the balance of payments deficit and the potential settled within the current scope of the tunnels.
Basra oil exports amounted to (South) in October of 2015, an average of 2.77 million barrels a day. The maximum what we have reached in July of the same year 3.081 million barrels per day. The adopted 2016 budget law in recognition of the exports of Iraq's 3.6 million barrels per day, of which 0.55 million barrels per day from Kurdistan and Kirkuk in the sense that the estimated exports from the South Oil 3.05 million barrels per day and had hoped to accomplish an increase in energy extraction from the South Oil so that exports of it rises to 3.350 million barrels per day. We understand from these data that the goal of exporting higher than the rates in 2015, but not to exceed the maximum levels seems so reticent a positive element if coupled with determination and the Oil Ministry to continue oil development in the contracted fields, and investment, as much as possible, in the infrastructure of the activity extractive projects.
But it is not reasonable to holding down the postponement of development may be necessary to prepare the financial and economic analyzes of direct projects industries that oil and gas-based raw material to do with energy-intensive industries, and these are important topics for the energy strategy, oil, which was prepared in collaboration with the International Energy Agency sector. The press picked up the contract to develop the petrochemical industry to foreign investment. There are add-on iron industry list of industries in the fertilizer, aluminum, cement and other industries and is usually described on the basis of resources. The energy strategy also included the development of electricity generation capacity based on more gas without crude oil and petroleum products. These are industries that are supposed to Iraq where the comparative advantage can form another source of foreign currency in addition to the great developmental role. But these trends to Atata fruit in the duration of the current crisis but extend for many years, and we will come to the importance of distinguishing between short-term and longer durations in the fiscal deficit and the dimensions of economic and social management policies.
And adopted the budget price of $ 45 per barrel of oil, but did not rule out price improvement during the year 2016 to be consistent with the average with the approved budget. The optimism is based on the improvement to lower Antah oil in the United States and contraction evident in the drilling towers. And that Russia has not achieved a significant increase in production in 2015 is expected to continue this level for next year. And it showed a market report for the month of November issued by OPEC that production from outside the Organization for Ayazdad 2016. In other words, the increase comes exclusively from OPEC countries, and to impose that the increase in OPEC oil will be lower than the increase in global demand will decrease the surplus in the market and the price starts to rise through the year.
In addition to the optimistic scenario above it has to be remembered, too, at current prices and we quote to the nearest whole dollar to facilitate follow-up. It has reached the price per barrel for the OPEC basket in December 17 to $ 31, and Arabs Texas oil barrel to $ 35 in December 18, and Brent $ 37 on the same day. And it is expected to WTI one year after that at $ 40 a barrel, the future price of Brent to $ 44 in December of 2016, the same date of 2017, about $ 50 a barrel.
It is clear that the current levels of oil prices requires re-economic and financial policies on the design of standard foreign currency to manage the crisis efficiently, because the dispersion and spread to many of the approaches does not help the settings necessary for the decisions and actions within the safe path. The standard one is to return all the decisions and actions to the types and uses of the balance of foreign currency resources, and despite repeated demand for many years to include this table in the budget document did not get a response. However quite a bit longer now that this table and the estimated follows a month in the House of Representatives and the ministers. The texture on the side of resources: oil exports, and foreign currency inflows of foreign investment in Iraq, and received by the government from foreign loans, and any other flows. Either on the side of uses it appears payments to the oil companies, government imports, and payments of government foreign debt repayment and interest payments and other obligations, including foreign companies outside the oil sector, and then the foreign currency sales are included to the private sector which is the bulk of the demand for foreign currency by nearly 40 billion dollars that the demand for foreign currency has not decreased effective policies. And note the difference between uses and receipts, a deficit of the balance of external payments, which should be compared to the international reserves of the Central Bank to determine the amount that would be reduced by that reserves for the settlement of the deficit, and what remains of them until the end of next year, and amendments required to maintain the cohesion and economic development.
Even if the oil price remains low as the average price per barrel of $ 35 returns, including the vests Kirkuk and Kurdistan estimated $ 46 billion, and the Southern Oil, the survival of the imposition of export 3.05 million barrels a day, the income of $ 39 billion. And at a price of $ 40 a barrel Revenue rises to $ 53 billion, including Kirkuk and Kurdistan exports, and $ 46 billion from the south's oil.
The Oil Ministry has been able to increase exports to Alhnob 3.350 barrels per day, the South Oil revenues are increased to $ 43 billion, with the price per barrel of $ 35 to $ 51 billion with the price of $ 40 a barrel. In any case, if the government remained uses foreign currency, for all purposes, including to exceed $ 30 billion can fill the balance of payments reserves of the Central Bank deficit until the end of next year.
And go back to a proposed one standard, which requires first demand for foreign currency is derived from the vocabulary of government spending analysis, and from the private sector, which affects the overall government spending and loans of the banking system in determining the level of income, and what are the possible policies to reduce the demand for foreign currency in each of the sector the government and the private sector. Including the employment of financial instruments and price and tariff to compensate for the imports of goods and services.
The increase in non-oil revenues mean to cut off resources from the private sector and transfer it to the budget and contribute to this deduction also in reducing the demand for foreign currency. In the case of the discovery of innovative policies to reduce private sector investment in overseas it is a great achievement in managing the crisis. It is clear that interest rates are high in Iraq, which is to turn to countries to encourage investment flows from abroad and increasing preference for local Almchrin to invest their money at home. But the question of the remaining net proceeds to invest in the real field, which compares with a private investor risk when comparing the business environment in Iraq and other countries.
There are other things that are not directly related to economic policy of the government, but the internal format of the business sector in Iraq. And who needs a lot to promote the positive values ​​of the partnership, and to deter fraud, and fulfillment of obligations, and the execution of contracts, and the repayment of loans, and all the elements that combine to circulate trust and which to activate Antsour business without them.
And any policies, procedures, reduce demand, in the final analysis, on imported goods, including durable goods are strongly required. In this context, we need a review of lending policies and support from this angle. As long as I talked state departments and senior levels for an economic renaissance in the commodity activities and results are still awaited. It is useful to distinguish, between now and decisively, between short-term and near-average, 2016 and 2017 and the longer durations. And to request the competent departments accurately answer about what, indeed, can be achieved in agriculture and manufacturing in the next two years. Here become an urgent need to disregard the analysis of economic decisions and projects to ascertain the extent of their contribution to the final outcome and National Economy angle to the strengthening of the balance of external payments. The experiences of the past years has shown for decades in Iraq passed the departments dealing with projects and programs studies, and evaluation of economic decisions, dropping imposition of the economic structure and the account bureaucratic obstacle in the way of development.
Iraq desperately needs to be ready to raise the community to carry and solidarity, and care for vulnerable groups, including internally displaced persons and families who can not earn an income and a measure of living requirements. In these tasks necessary to sincere cooperation between civil society and official circles for the proper disposition of resources and delivery to the desired goals.
Civilized dialogue.