BAGHDAD: Iraq’s budget deficit should fall to 5 trillion Iraqi dinars ($4 billion) at end-2014 from 14 trillion dinars ($12 billion) proposed for 2012, as the country benefits from increased oil revenues, Finance Minister Rafie al-Esawi said.
Esawi said that, according to the Finance Ministry’s three-year strategy plan for 2012-14, the deficit will decrease steadily as oil production and exports grow.
“In the mid-term plan, the deficit is supposed to decrease to 5 trillion. In 2014 we expected it to reach 5 trillion [Iraqi dinars],” Esawi told Reuters in an interview Thursday.
Baghdad has signed a deals with international oil companies to boost its oil production capacity to 12 million barrels per day by 2017 from 2.95 million bpd at present. That could vault Iraq into the top echelon of producers.
But many analysts are skeptical that Iraq will reach its ambitious target due to infrastructure constraints. Iraqi Oil Minister Abdul-Kareem Luaibi said in September a production capacity target of 8-8.5 million bpd would be “more suitable.”
Budget shortfalls have been a challenge to Iraq’s ability to rebuild after years of conflict following the 2003 U.S.-led invasion that ousted dictator Saddam Hussein.
Esawi said the proposed 2012 budget of $100 billion, which still needs parliamentary approval, was based on forecasts for 5 percent GDP growth and inflation of 5 percent for the year.
Iraq’s Cabinet approved a draft 2012 budget of $100 billion Monday and it is expected to be sent to parliament in few days for final approval.
Iraq’s core annual rate of inflation fell to 6.9 percent in October from 7.3 percent in September, a central bank official said last month.
Esawi noted that oil prices are currently better than the $85 for a barrel of oil assumed in next year’s budget. Global crude prices rose toward $110 a barrel Thursday.
Iraq is recovering after years of war and sanctions and oil still dominates the economy, accounting for 95 percent of government revenues. It is slowly rebuilding its dilapidated infrastructure, and needs investment in virtually every sector.