Iraq Gov moving Forward in 2016
Did you know that Iraq is the world’s fourth largest oil exporter and its economy is completely dependent upon oil? A recent Bloomberg article reported that the Iraqi government had sold over a billion barrels of oil in 2015. A billion barrels is an exorbitant amount and it is discouraging the financial status of the Iraqi government. The cash has dried up. This past year the Iraqi government had much to deal with. They were faced with numerous challenges. Terrorist organizations infiltrated their country and many captured large swaths of northern Iraq. Much of this has led to an increase in community prices and disruptions of trade. Businesses large and small have either closed down or have relocated to another part of the country to feel safe. It is extremely difficult to maintain a business and then have to flee because of a threat to your family and business. It’s a complicated challenge to upheave and relocate your business to an unknown location and start from scratch.
Iraq and the Kurdistan Regional Government (KRG) are trying to get a handle on the two million displaced persons due to the war. The displaced individuals have caused havoc on logistics, infrastructure and delivery services. Both governments are doing the best that they can in light of the current situation. The costs are high and draining the operational budgets of both governments.
Iraq without a budget not a great image to the world
In 2014, the Iraqi government was still without a federal budget for more than 11 months. When the Iraqi government failed to pass a budget this further destabilized the economy. The Iraqi government did not approve of this and responded by blocking investment and construction projects already allocated from previous years. The Oil and Gas did not get the needed funding and forced the Iraqi government to search for foreign investment. In the meantime, the media continues to portray the security situation in Iraq as extremely poor, and this has caused hesitation in investing from international companies. Not having a 2014 federal budget didn’t sit well in the international markets. Companies have taken a back seat and are pausing to see how the security situation unfolds or levels out.
The Iraqi government is unable to respond to the costly budgetary and military costs. The increasing budget deficit that is at $30 billion usd., is due to the lower international oil prices, fighting terrorists, displaced persons, and lower production and exports. The subsidized State-Owned Enterprises (SOEs) have also been impacted. There are no funds for development in any (SOEs) currently. 2016 it is going to be an extremely difficult year for the Iraqi Government.
Iraq spending millions to fight a war
At the present time, the Iraqi government is spending close to $50 million dollars per day on the war with the Islamic State of Iraq and the Levant (ISIL). The Prime Minister, Haider al-Abadi has stated that he is committed to fighting corruption and investing in infrastructure.
The Iraqi government will not be making any decreases or cuts to any of their government employee salaries or pensions for the year 2016. News media reports are for the most part, inaccurate when it comes to keeping it straight on business with the government. To cover the expense, the Iraqi government will be securing a $2 billion dollar loan from the World Bank.
New report from the Central Bank of Iraq
The Central Bank of Iraq (CBI) published a report, which says something to the effect “Decides to re-evaluate these investment shares at the beginning of 2016.” I would like to draw attention to this because many have misinterpreted this statement. This is not the revaluation or the changing of the exchange rate in a positive nature. The CBI is requesting that all financial institutions in Iraq update and balance their bank books. The CBI sends this request each and every year about this time. There are many overzealous/exaggerating/misleading gurus that will hype up and take advantage of these types of reports to deceive you on these topics. Please do your own due diligence and focus on what is reality and the facts.