The Akkad Center for Economic and Financial Studies held on Sunday evening, 2/4/2023 economic seminars entitled (The State Budget 2023: Its Dimensions and Challenges of Adoption) During which many experts in the economic and financial fields and university professors spoke. The seminar discussed the proposed Iraqi federal budget law for the fiscal years 2023, 2024, and 2025.
The symposium covered several topics, the most important of which was the realism of the assumptions on which the budget was based and its adoption of a $70 per barrel price in light of current oil prices and the possibility of their future decline, as well as the impotence of the budget and ways to reduce it, the investment spending of the budget and other topics such as the share of the region and the energy file and the consequences of the decision.
We are enclosing a summary of the proposals and procedural suggestions that resulted from the discussions at this economic symposium, which we hope will contribute to the overall support of the Iraqi economy.
The most important observations on the draft federal budget law of the Republic of Iraq for the fiscal years 2023, 2024 and 2025
Following an evaluation of the general budget data and tables, it is evident that:
- The government has accepted the continuation of the unilateral economy motivated by the financing of increasing public expenditures, as operating expenditures accounted for 75% of the budget, or approximately 150 trillion dinars, while investment spending amounted to 25% or approximately 49 trillion dinars. Thus, consumption spending dominates the public budget relative to productive investment expenditure.
- The 25% allocation of investment expenditures in the general budget structure hardly meets the requirements of the Iraqi economy, whose infrastructure has been destroyed by successive wars, indicating that the government has not paid much attention to the investment aspect, which is the main link of any economy, and the general budget items have not witnessed any financial allocations for economic development plans from vital and strategic projects, and all of these factors indicate that the Iraqi government has not prioritized the investment aspect, which is the main link of any economy.
- The government’s reliance on volatile oil revenues to finance the general budget with revenues estimated at 117 trillion dinars and the average price of a barrel of oil at about $70 raises serious concerns because it is close to the prevailing price on the international market, which is expected to decline shortly by international institutions concerned with energy affairs.
- The government’s estimate of non-oil revenues at 17 trillion dinars is enormous and inflated, as non-oil revenues have not exceeded 13 trillion dinars over the past few years.
- The planned deficit in the general budget for the year 2023 violates the Federal Financial Management Law if it exceeds 64 trillion yen, or 3%, as stipulated in Article 6 IV of the Financial Management Law for the year 2019 (the deficit in the planning budget may not exceed 3% of GDP).
- The increase in the operating budget relative to the investment budget, which does not exceed $48 trillion, indicates that the investment budget may not be financed due to the deficit’s severity. This indicates that no economic growth has been realized this year.
- Dependence on internal and external loans to satisfy the 64 trillion dinar deficit places the Iraqi economy in front of two cases, the first case: fluctuating revenues and fixed obligations and dues, leading to the continuance of the general budget deficit. The second scenario: the accumulation of the deficit leads to the problem of indebtedness due to the lack of cash available to pay its obligations and the need to resort to loans from international institutions to fill the deficit, and then fall under the auspices of the International Monetary Fund and are subject to stringent conditions for years by entering into new hedging arrangements.
- To address these problems and challenges facing the public budget, it is necessary to reduce the consumption trend of public spending and make good use of abundant oil financial resources by directing them into investment channels capable of diversifying the economy and creating a productive base with a high return and productive assets that retain their value and can increase this value through the establishment of vital projects that contribute to expanding non-oi revenues.
