The Iraqi economy and turbulent oil market

March 29, 2017

Baghdad the journal news

Iraqi Economist highlighted, Kristina the tastes, light on the turbulent oil prices and noted that oil prices had entered its third year amid receding hopes for market price return recovered standard levels by June 2014. With coincide with crude reduction agreement both inside and outside OPEC to adjust supply rhythm and absorb surplus.

He says the taste. However, still swinging around Brent prices rate (50-55) dollars per barrel under the pressure of oil return Rocky previous levels and rising global strategic stock and modest rates of growth in world oil demand.

In the oil countries, accumulated financial deficits raise question about the ability of these economies to withstand the low oil price and coexistence with especially dependent on oil resource in the financing of the budget and the development of the economy on the one hand and poor predictions on return prices to their previous levels.

In Iraq, the direction of crude oil prices drive the country toward the acute part of this crisis, because excessive dependence on oil and the weakness of the Government's policies in generating alternative financial resources contribute to increasing public expenses as a result of the war on the ISIS and the human costs and breakdown in infrastructure.

Can monitor the main challenges that surrounded Iraq's chances to pass the current financial crisis:

1. the decline in oil revenues because of the deterioration of oil prices and entering Iraq to agree new oil production country judge exceeds 200 thousand barrels per day.

2. the weakness of the Central Government in response to resistance arising from sovereign financial resources mobilization as taxes and fees, etc. The Government has failed to apply many tax laws initiated during the years 2016 and 2017 due to obey the wishes of the units to be traders and weak law enforcement in the country.

3. inflate consumer spending and the Government's failure to adjust the financial sources of wastage due to collision with an established political and partisan interests as reducing social benefits and privileges for special grades and merge some ministries and government bodies.

4. sliding Iraq debt trap again after difficult negotiations ended the legacy of accumulated debt under the previous regime. It had accumulated total public debt in the country to touch 100 billion dollar threshold during the last three years only, that Iraq had achieved a fiscal surplus of $18 billion boat until the beginning of 2013.

5. the absence of an appropriate investment climate to attract foreign investment and stimulate domestic investment to exploit the great investment opportunities in the country, largely because of the deteriorating security situation and lack of vision in providing incentive laws and legislation as well as the lack of adequate infrastructure to launch their own projects.

6. financial and administrative corruption and stunningly political within most government seminars, especially with a grotesque political competition about swallow State resources and potential for strengthening and empowering the ruling parties taking power.

7. the worsening unemployment horrendously, approximately 30% of the total workforce, which increases the risk of deterioration and shrinking domestic economic activity and also alarming decline traffic exchange and trade and increases the growth of violence and engage in crime for physical reasons.

The expert considers that rely on the recovery of oil prices in the world market to provide funding for the budget and the economy shaky pillar is threatening the entire economic activity in Iraq, especially with the harbingers of recession in the world economy and weak expectations about the return of prices to levels before the collapse in the oil markets continued to sink.

The continuing price decline in oil prices to increase burdens on the national economy, in conjunction with multiple internal burdens, notably security and political turmoil. However, the adoption of prudent economic policies have turned challenges into opportunities to restructure the economy and alienation growing rental form for diversifying the production base and promote sustainable economic growth and stability.

We must recall, by reference to the required economic policies, that any successful economic reforms depends on the will and seriousness of the ruling political parties in proceeding with the development and construction of the Iraqi economy, because they represent economic legislation and implementation of machine in the country.

A highlight in this context solutions posed are:

1. the "general expenses: from the ongoing financial crisis highlighted excessive overhead during the previous years due to high oil prices and the absence of proper planning and supervision, at the expense of the sovereign wealth Fund as preparation for Gulf oil shocks oil countries stmrar.

2. Government revenue diversification: discloses that government experience is able to diversify budget revenue from taxes and does not activate the public sector companies and Government departments across to the weakness of the rule of law and the inability of the Central Government to apply the law in force on the territory than central and southern governorates not to comply with the laws and Government regulations concerning tariffs and taxes unless the territory first, this situation has been repeated for years.

3. encourage the private sector: there are efforts to stimulate private sector starting because of its pivotal role in assimilate and move all the stagnant economic sectors, the Cabinet has declared more than once his quest to overcome all obstacles to the launch of the private sector and took a leading role in achieving development and absorption of labour and diversify the economy of Iraq, but without the appropriate infrastructure and a stable security situation and an appropriate legal and fiscal legislation and effective customs protection, these actions will be only structural letters away from Iraqi reality.

4. adoption of the programme budget: one of the main reasons for the Iraqi economy stalled during the previous years absence economic program of expenditure and Government revenue in the budgets of previous years. So the next budget should contain an economic program simulates the economic crisis in the country and establish a new pattern in file manager and economic diversification tends to stimulate agricultural and industrial economic sectors, tourism and promotion of the private sector to reduce Mono Iraqi economy and chronic dependence on oil resource.

5. not to engage in international credit programmes: did most of the experiences of developing countries in encouraging borrowing and eventually concluded debt rescheduling and selling public sector and national wealth to foreign companies, and believes that there is a plot to seize Iraqi oil by giant corporations, especially after criticisms of difficulty with Iraqi negotiator in the Centre. So be wary of international borrowing and high interest rates for fear of falling into the trap of indebtedness and its serious economic consequences.

6. use audit institutions and international control away from the political consensuses and quotas for detecting corrupt files and organize the expenditures and contracts awarded transparently.

7. fix the banking system and the enactment of deterrent laws to make the country's banks to convert private banks to finance bridges no offices for money laundering and smuggling.

8. dimensions of higher economic positions in the country on quotas walmhasobi, notably the Iraqi Central Bank and the Ministry of finance and the Ministry of planning and the Ministry of trade and industry Ministry and the supreme body for investment, and that it was not possible at the level of Ministers, it's okay to be at the level of the agents and advisers public managers.

9. in coordination with the Ministry of higher education and scientific research in support of the work of all ministries through mutual cooperation to give scientific aspect in the management of State institutions, including State-of-the-art science and technology, as well as to ensure that the outputs of the Ministry within the requirements of the labour market to secure jobs for graduates.