BAGHDAD: Iraq’s preliminary budget proposal for next year is 78 trillion dinars ($66.7 billion) based on a price of oil of $60 a barrel, government spokesman Ali al-Dabbagh said Wednesday. The spending plan is 14 percent higher than this year’s budget of $58.6 billion, which was revised down several times due to a sharp fall in oil prices from last year’s record highs.
The proposal, which must be approved by the cabinet and parliament, may be changed before ministers vote on it.
Dabbagh said the cabinet would decide next week whether to increase spending on energy, health, education and other priorities before finalizing the budget.
Deputy Finance Minister Fadhil Nabi said about 58 trillion dinars of the proposed budget had been set aside for operational expenses and 20 trillion for investment spending.
The 2010 budget is calculated on expected oil exports of 2.15 million barrels per day – slightly higher than current levels, which averaged around 2 million bpd in August.
The steep fall in oil prices from last year’s all-time high near $150 a barrel punched huge holes in Iraq’s spending plans, prompting some politicians to warn of “financial catastrophe” in 2010 if oil prices remained depressed and the struggling oil sector could not increase production.
The government, desperate to rebuild the nation after more than six years of war and destruction since the 2003 US-led invasion, may face problems funding its enormous public sector and welfare programs that include food and fuel subsidies.
The International Monetary Fund, which is holding talks with Baghdad on a $5.5 billion loan program, has advised Iraq to reform public finances and entitlement programs.
It has called on Iraq to curtail its food ration system to include only the truly needy and has urged steps to eliminate ghost workers among the huge number of public sector employees.
The government, which relies on oil exports for more than 95 percent of its revenues, hopes to boost oil output by inviting foreign oil majors to develop its crumbling energy sector.
It is also trying to diversify the economy by resurrecting moribund agriculture and industrial sectors, which account for only a tiny share of economic activity.
Iraq has had problems in recent years spending budget funds as ministries have been unable to execute proposed projects. – Reuters
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