Economic reform in Iraq for 2016 12/20
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    Economic reform in Iraq for 2016 12/20

    Economic reform in Iraq for 2016

    December 20, 2015

    In the month of August 2015, the Iraqi Prime Minister Haider al-Abadi reforms to reduce the size of government and tackle corruption. Speaking Louay Khatib, founding director of the Institute for Energy and the Iraqi non-resident fellow at the Brookings Doha Center, the magazine The Oil and Gas Year of how these measures help the country to survive.

    Iraq is dominated by income from oil exports, the rentier economy, and oil revenues make up 43 percent of GDP, and 99 percent of exports, and 90 percent of total federal revenues. Thus, in order to increase public revenues, the government always under pressure to increase oil production capacity regardless of market fluctuations.

    The government expects to issue 3.6 million barrels of oil per day in 2016. While it is possible to achieve this volume of oil exports, keeps getting US $ 45 a barrel Tmanaa optimistic.

    Civil service Mtkhomh

    Despite the global economic crisis that affected the oil market in 2008, oil prices continued to rise steadily in the past decade compared to the nineties of the last century. As a result, the departments of exaggerating the Iraqi federal budgets and increasing employment is necessary, so the introduction salaries for employees in the public sector is eligible and ineligible enough.

    Federal budget for Iraq increased to five times its size between 2004 and 2015. Regardless of the size of the oil revenues coming into the Treasury, budgets always suffer from a deficit of about 20 percent, while actual spending always up to 70 percent or more. That would leave less than 30 percent for investment and development.

    Although Iraq, with the calculation of the Kurdistan region, has managed to raise its production by two million barrels of oil per day since 2010, bringing the total production to 4.4 million barrels a day, he spent the collapse of oil prices on 60 percent of the previous market value of oil.

    Moreover, it may stand cost is expected to war with the organization of the Islamic State in Iraq and the Levant (Daash), and management of 3.5 million internally displaced persons, and internal politics factional, and infrastructure projects giant stumbling stumbling block in the face of further progress in the country.


    However, the Ministry of Finance has proposed a budget for 2016 of $ 99.6 billion, with a projected deficit of $ 25.8 billion. Budget expect that the price of a barrel of oil to $ 45, and assume continuation of the deal, which concluded in December 2014 with the Kurdish Regional Government, which authorizes the federal government to get 550 thousand barrels of oil a day from fields located in the Kurdistan region of oil-for-pay for it.

    Formed of 550 thousand barrels of oil per day from 300 thousand barrels of Kirkuk oilfields and 250 thousand from the Kurdistan region of fields.

    The government expects to export 3.6 million barrels per day in 2016. While it is possible to achieve this volume of oil exports, keeps getting US $ 45 a barrel Tmanaa optimistic. In the end, 2016 will be difficult financially, with central bank reserves from the Fed the dollar following the collapse.

    A new political culture

    The status of Iraq's security and financial less serious than in the neighboring countries not belonging to the Gulf Cooperation Council. In the absence of alternative sources of income of a viable, low oil prices may pose a constantly real opportunity for reform in Iraq, because it is characterized by a local government truly represents all ethnic and sectarian groups.

    Prime Minister Haider al-Abadi enjoys popular support since the protests calling on the government to provide public services and the fight against corruption and implementing the rule of law in various Iraqi provinces in early 2015. Despite the adoption by the Parliament initial reforms made by Abadi as of August 2015 package, but the people hope More of implementation.

    Necessary procedures

    Since it is likely that oil prices will remain low, the government should phase out subsidies on fuel and electricity generation to provide at least $ 14 billion a year on local raw materials imported and liquids.

    Moreover, the government should stop the excessive employment in public institutions. It must be public sector employees' salaries and spending subject is necessary to review the minutes.

    In addition, the government should provide incentives for the private sector to fill the void operating in various economic sectors, including oil and gas, after decades of internal strife.

    These developments will provide Iraq the additional 10 billion paid on the salaries of civil servants form annually, thus easing pressure on the debilitating budget because of lower oil prices.

    The way forward

    Iraq should be the first priority to attract more international investors in the field of energy and refining projects and the use of flared gas generation. Iraq will have to use the savings resulting from reforms in the remanufacturing and start manufacturing, which means they will eventually become less dependent on imports.

    Iraq will indicate successes and failures in 2016 Kplad flexibility reforms made by al-Abadi package. Although the task seems enormous, reforms in what is impossible if the government has taken the right actions remain.

    Louay Khatib
    Brookings Center
    Last edited by Loopback; 12-20-2015 at 06:49 PM.

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