D. Full dentex *: financial budget of the Federal Republic of Iraq for the fiscal year 2015, the pros and cons, analytical criticism
- Published in 01/08/2015
Introduction: days ago drew me, within a group of prominent writers and intellectuals, colleague and friend Dr. Sabah al-Azzawi, an important question is whether located on the popular masses tax burden to finance the financial budget of the government for the 2015 deficit, despite the existence of corruption and waste? In the opinion of the so-called burden of taxes or consequences, incidence of taxation)), is of two types, directly and indirectly, not to mention the fees for government services, should be imposed not only to finance expenditures budget and / or inability, but also for the purpose of implementing the so-called the objectives of fiscal policy for the management of the national economy, if any, there are the goals of this mainly purpose, but under the Terms and prior assumptions, including; achieving economic and social balances; including achieving the goals of social justice, as entitled to the study of the distribution of income and financial sheets; and for the protection of local economic activities and to ease dependence on trade International and invasion of imports on local non-oil exports account; including to increase domestic production efficiency; and to counter the effects of the emergence of cases of cash or Ksada inflation or deflationary recession accompanied by lower purchasing capacity and low domestic demand and the standard of living inflation. This important aspect, which provides financial policy instruments should be parallel with the implementation of appropriate monetary policies and banking, and all these things had to be the existence of predictive and pre-analytical and in-depth studies is not at the macro level, but also on the level, sectoral and partial. To delve into the concepts of these tools requires ample space, you may get us out for the answer to this question is important. However, to answer calls contemplative briefing document financial budget, which was referred to the House of Representatives by law. To make our research center away from the purely academic, we will try to limit ourselves on the basics. In section (1), we'll show a brief definition of the budget and combinations Rknyha; expenditures estimated cost and revenue, as well as transfers and precautions different distributions, as well as the issue of financing the estimated deficit, when it is happening, because of the superiority of expenditures on estimated income, or where it meant the deficit for the purposes of achieving some of the goals fiscal policy, and this aspect does not seem that it is located within the planners thought fiscal policy in Iraq, because the financial budget looks as if it is a perspective, as a fund or "vault" for the conduct of business !, not to mention the primitive methods of estimation lacking any scientific studies supported. And we will show that the budget and the two essential; first, to provide cash resources to cover expenditures on government services and activities not associated with the ministries of bodies, and which ones belong to the Kurdistan region. Resources and expenditures come through the income estimates, a crude oil export revenues of direct and indirect taxes, grants and subsidies and transfers rounded and surpluses or reserves, and others. And second, to implement fiscal policy objectives for the purpose of achieving the required balances in accordance with the objectives, determined, usually, development plans and investment programs (1). In Section 2, we will focus most important features of the budget document for 2015, and we will be discussing several aspects of. In Section 3, we will focus on the sources of funding for the estimated expenditures, on the one hand, and the efficiency and feasibility of these expenditures in the light of the functions of government to implement its management of the national economy, on the other hand. And we will discuss, concentration, the amount of suitable installation of the financial budget for 2015 with the functions of government to implement fiscal policies also required, along with the achievement of justice in the distribution of liability for direct and indirect taxes in the Iraqi economy and society. In the section, (4), we will give a calendar year, then we take some of the conclusions and recommendations.
(1) - the financial budget for 2015: general characteristics and comfirst the ability of government spending for the implementation of its program for the 2015 allocations, and to meet the challenges of the attack Aldaasha terrorist who occupied Mosul and towns of the three other provinces in northern, central and western Iraq in order to defeat it and edit areas taken, which requires a large military and security expenditures and to increase our size allocations required for this purpose. The second is the estimated revenue allocations and the deficit is destined for the gap between spending and revenue; Stnolhma later. Are summarized below, in some detail, the most important items such expenditures, and then we follow analysis of projected income and deficit:
Estimate of the expected government expenditures: estimated total government expenditures, disaggregated by Gredaha key; this to cover the expenditures of the government to manage its services in the Iraqi economy, disaggregated by ministries and agencies is related to the Ministry, and investment for the implementation of development projects, which are also classified according to the ministries and independent bodies. This total estimated volume reached, (Senkerb numbers to the nearest million, to facilitate the reading, without affecting the results of the analysis), approximately; (125 203 111), one hundred and twenty-five trillion two hundred and three billion, one hundred and eleven million dinars; the equivalent of about (111.590); a hundred and one dozen billion five hundred and ninety million dollars. The nature of the expenditures were distributed between the current 64%, and investment to finance the project expenditures by 36% of the total estimated expenditures. The distribution of these expenditures on the ministries and implementing agencies ratios, it is sufficient to show the Ministry of Oil has acquired a proportion of 13.2% of them, followed by the Kurdistan region, increased by 12.3%, and there is no indication in the spreadsheet attached to the budget document and private revenue sources to suggest the size of the ability of income received from this region!) (2) 0, followed, of course, allocated to the Ministry of Defence ratio, under the current security conditions, increased by 12.2%. The rest of the expenditures ratios, ranging between 1.3% allocated to the Ministry of Industry, which is the lowest rate is reasonable in the light of dilemmas growth in the Iraqi economy. It is strange to find that spending on the activities of the House of Representatives of 2.4%, a percentage allocations amounting to twice the proportion allocated to the Ministry of Industry, the Ministry of Agriculture and Water Resources with it has been allocated to them, more than 10% of expenditures. Followed by the Ministry of Scientific Research. But 64% of these expenditures are geared, predominantly, to meet the ongoing activities and not an investment. The budget document also noted that the investment projects that have not implemented the proportion of 50% up to 07.01.2015, will be stopped! (3) We do not know what is the philosophy of this procedure as long as the assumed allocations may be calculated? Is the procedure is to stop funding or solving problems that hinder the implementation? Are summarized below brief notes about the size and distribution of these expenditures in terms of both development priorities, on the one hand, hand appreciation and implementation methods:
1. relationship allocations spending power of national development priorities plan; and put the national development plan for the five years from .2013 to 2017, year target for GDP growth at an annual rate of 13.3%, at constant prices of 2012, to grow the commodity sectors, such as agriculture, industry and others at a rate of annual growth rate of 7.5%, while crude oil extraction sector grow at an annual growth rate of 18.7%. Also allocated investments, increased by $ 282 billion over five years, an average of 56.4 billion dollars annually. Whereas under close the budget for 2015, that investment spending on all existing projects which did not proceed with no more than $ 40 billion in 2015. The growth rate in the commodity sectors did not exceed 2-3% instead of the 7.5% estimated in the National Development Plan. And this seems to us to set development plans do not constitute a reference for the development of financial projections, or that the financial estimates put not based on predictive studies prudent. (4)
1. How to estimate expenditures and their implications for monetary policy purposes, if any? Financial budget is not just a fund collects the revenue to spend on economic management requirements, it is a form Chairperson, however, the government tool to put fiscal policies in order to achieve the balance between economic activities production of goods and services, Increased spending will lead to move the application in cases of contraction and stagnation in economic activity and falling in price levels. The spending cuts lead to combat inflation and the generally high rates of prices, and the concentration of the reduction in service activities is essential, with an attempt to maintain the investment spending, that these policies promote banking financial policies such as raising interest rates in banks to encourage national saving and curb excess consumption. In all these examples Sagnaha want assertion that the exercise of fiscal policies may be required to achieve a surplus or a deficit in intentional financial budget. If the estimated expenditures and revenues in order to meet the requirements of the management of the national economy in isolation from estimating their effects on balance, they turn to the secretion of adverse effects in the course of economic activity. Accordingly, the budget must Baraknyha Alanvaqa and Alaiardi preparation according to the amount of depth to the movement of the national economy variables studies. Through close reading of the financial budget for 2015 with detailed schedules for expenditures and revenues by expenditure purposes and sources of revenue, we did not find any indication of financial considerations and the side effects of spending or revenue growth rates on the march and the standard of living of citizens.
2. Are there procedures to prevent waste and corruption and bring thoughtful austerity does not materially affect the lives of people and not on the performance efficiency? It is known that corruption had spread among a large proportion of its officers and employees and customers with the Iraqi government, is enough to recall that corruption cases referred to the courts had reached during the last two years, more than two thousand of them the case has not been decided, but only a few hundred. In addition to the theft of public funds and abuse of office for the privileges and protections to officials, there is waste and weakness in financial control in many of the organs of government, and this, as well as the weight of packages salaries enormous paid to officials and deputies with privileges to bowl the financial budget, including preventing the achievement of objectives that we have mentioned . Can not be in this situation Mujhah financial budget to meet the developmental, financial and service needs efficiently and accurately put, and therefore we will find, in the end, the field will be different from the account Baydar account !!
1. Do I need to finance the deficit is expected to increase domestic and external borrowing, or to improve the performance and efficiency of the recruitment of government savings that should form the reserves calculated for the emergency, and the savings of citizens, public bodies and private companies? In the case of a deficit as a result of the predominance of the value of expenditures on the value of revenues, what is the best way to filled or reduced? Is Ballja to borrow and carry the benefits of it, and then the adoption of direct taxes on income and wealth, and the indirect taxes levied on goods and services, especially the ones imported? Yes, this is the traditional way to cover the deficit, but should be studied and scrutinized the case of the social strata of the population of consumers, according to their incomes and their levels of the process, if they are unemployed or unable to work or are realistic in the nets poverty and destitution. How to distinguish between them in the imposition of direct and indirect taxes? The answer depends on the type required diagnoses according to a prudent amount of living standards and to distinguish between necessities and luxuries studies. When imposing an indirect tax on the imported commodity should calculate the so-called flexible price of the commodity on according to the size of the change in the demand for them, and this matter concerning the manner revenue estimate by sources, we will refer to it later. And by reference to the Finance Ministry, which is revenue collection plan style, we know through previous experience in this ministry that there is no such studies, we propose, then, without response.
(2) - estimate of the expected revenue in this budget: revenue kinds estimated in this budget by equals, (99,801,875), ninety-nine trillion eight hundred and one billion eight hundred and seventy-five million dinars, and the shortcut will write 99.802 trillion dinars, or about 100 trillion dinars, and is equal to 88 950, eighty-eight and nine hundred and fifty million dollars. According to Table (1) revenue by the numbers for 2015, which is contained in the Appendix at the forefront of the attached tables with close budget for 2015, (5), has calculated the distribution of the projected income ratios by sources; calculated percentages of the total estimated income, which we have referred to the value of above.
Table 1 shows the projected income distribution ratios, according to sources for 2015.
1-oil revenues and mineral wealth 84.4
2-taxes on income and wealth 1.8
3-commodity taxes and excise duties 3.5
5-budget share of the public sector gains 3.4
6-capital income 0.5
7-manufacturing revenue 1.2
8-Other income 3.1
Estimated total revenues of $ 88.950 billion = 100%
Are summarized in the below, the most important observations:
1. Notes, clearly, that the revenues from the export of crude oil constituted 84.4% of the total of all estimated income from all sources. Of course, the situation reflects the overwhelming dependence on the oil sector, and this is a problem requiring specialized research. (See Reference No. 6 in the end of the article).
2. notes, clearly, also, that commodity taxes do not constitute more than 3.5% of the total estimated revenue, a small proportion of not more than three billion dollars and a half billion, but its impact on social justice for Dafieha depends on how the criteria applied, do my necessary ? Is infect consumers with low incomes? What is the price elasticity of the product imposed by the indirect tax or customs, if they are imported, you ever demand is inelastic, meaning it is an essential commodity for a large segment of consumers, such as medicines, etc., then you should avoid imposing or make it low and sensible, and vice versa for Commodities entertainment. On the whole, the estimated value of the revenue from this tax in this ratio does not exceed three billion and a half billion dollars, so it must be cautious in imposing and identify consumers at the quality of her style, because the achievement of justice and to maintain the standard of living must be of the financial policy of the annual budget targets .
3. also notes that the public sector provides an annual dividend to the government by three billion and a half billion dollars. The government is supposed to keep the public sector some of its profits to the development and re-investment.
4. Also notes that the tax on entry and low wealth, does not exceed 1.8%, and is supposed to affect the high income earners and large wealth rather than junior staff, workers and toilers. Also, the fees should be imposed at the request of government services, depending on the size of their consumers, the larger the magnitude of the asylum of these services, as it was supposed to reduce the proportion of fees, to reduce the burden on reviewers from low-income.
5. It is difficult to comment on other income ratio because it is non-specific, but the increase may provide, as appreciation of about three billion dollars.
6. Another important note, concerning the manner not estimate the tax rate, but the possibility collected at the lowest cost and in time required to complete and honestly, Ohz administrative and regulatory subject of disciplinary and functional, not here area for consideration.
The objective of these observations is to refer to the factors that make each of the implementation of taxes and other revenue size actually collected, according planned estimates, may not come by to see the planned or estimated, even though adopted the results of the collection of taxes of all sorts in previous years, because it must be taken Aldkhalah into account all the changes and spending patterns and tastes and income levels into account when preparing so unexpected revenues. Here comes our critique of systematic budget figures, although we have not yet seen the studies on the amount of deviations between planned and collected all kinds of taxes and other income in previous years. Thus studies preparers of financial estimates of the financial budgets would be used as the future.
(3) - the budget deficit: get the deficit financial budget is not due to reasons of fiscal policy, but because the contrast between spending and revenue assessors did not Ihspa scientific way of the possibility of high accuracy, but because of speculation and methods of collecting and spending is inefficient, due to lack of reliable to economic studies / Social appropriate. According to the financial budget for 2015 is likely that the fiscal deficit arising from increased estimates of expenditures to revenues increased by 23.401 trillion, an increase of almost 23%. According to the document the budget referred to, the government intends to plug style domestic and external borrowings and the issuance of bonds, treasury and couriers, etc., directly step, hoping to collect and pay off loans and financial obligations, to pay the interest and bond yields, remittances and other through revenue collection actually, over the fiscal year through direct and indirect taxes and balances retained and others pointed to above. The show in the table below the government's plan to identify sources that will be adopted to provide funding ratios, and the consequent benefits and obligations must be repaid later:
Table 2 shows the borrowing rates and the proposed funding in the budget to finance the deficit
Source Ratios according to sources of funding for the estimated deficit
1. retained stocks of 2014 12.8
2. Special Drawing Rights 9.0
3. The issuance of foreign bonds 26.0
4. the issuance of public debt bonds through the legal statutory reserve 26.0
5. loans and remittances by TBI 12.8
- The issuance of treasury transfers from Iraqi banks 12.8
The source, who calculated the ratios above him; and document the financial budget for 2015.
Notes, clearly the following:
1. that balances retained from the 2014 clog estimated deficit of 12.8. Perhaps the supervisor was expected to be retained balances are larger in terms of proportion because of high oil prices before recently landing compared to the price in previous years?
2. The issue of foreign bonds and bonds of public debt, together constitute 52% of the proposed financing to meet the size of the deficit. And, of course, will arrange for the payment of benefits to be paid on bonds purchased, which will increase the debt burden of the government for the coming years.
3. Loans and remittance in items 0.5 and 6 in the table amounts Nspthma together 25.6%, which will increase the indebtedness of the government for the coming years, too.
(4) calendar with some of the conclusions and recommendations: We reviewed a budget for fiscal 2015, the structure of the center, and the most important features of the relative composition of expenditures and revenues estimated deficit, and we have expressed our observations on the implications and repercussions style developed or guess, for not they are based on analyzes of a standard suitable for this purpose. The essential characteristic clear that oil export revenues constitute the main source of funding, by more than 84%, and the rest of the funding sources, such as taxes on income and wealth taxes commodity indirect and using the funds retained earnings sector, public sector, and more all do not constitute more than 16% of the value of resources estimated, however, marred by some of the negatives regarding justice element in the distribution of the burden of these taxes, according to the observations that we expressed. We conclude provide some preliminary conclusions and Nlhakha some general recommendations intensive.
The most important conclusions; apparently through the analyzes provided that the preparation of estimates of this budget was not based on the record amount diagnostic accurate studies, and not counted account factors of corruption and lack of administrative efficiency in controlling the value of expenditures and resources estimated, but is parked to adopt the style of appreciation speculative based on past practices . And come up with some general recommendations below:
1. Work on the development of methods of estimating the financial budget of expenditures and resources and the inability of the elements, according to sources, the adoption of the standard quantitative analytical methods, in order to achieve the degree of probability of greater precision, and to help in the diagnosis of administrative ills and regulatory and Alvesadah in the preparation of the financial budget, as not only a tool for the exchange and collection of revenue but also as a tool to achieve development in the functional and financial performance.
2. Consideration should be given to the financial budget as an important tool in the implementation of the required fiscal policies to achieve economic and social budgets in light of the maximum possible growth of the Iraqi economy goals, during the budget year and beyond.
3. remain strategic objective is to work on not only the case of rent-seeking accreditation to export crude oil, but also to consider carefully and warned to adopt the price of a barrel of oil now is to calculate the expected oil revenues in the budget. This requires the adoption of predictive scientific studies about the global demand for crude oil volume, general and Iraq in particular. For example, adopted a budget price of $ 60 for an expected price of a barrel of Iraqi crude oil source for the year 2015, but is now verging on the landing below $ 50 per barrel, and there is the possibility of further decline in the price during the current year. But the agency for Global Energy Studies, (IEA), indicate that the price of a barrel could start to rise again, especially in the next decade and the next, because of the potential increase in demand for the desired energy in developed and consumed crude oil states. However, in all cases to be predictive of advanced studies for crude oil prices in international trade. As a matter of caution should have this financial budget adopts price of a barrel of oil at $ 40 instead of $ 60, will rise if the increased resources and less need to borrow, it will also help to alleviate the need to increase the direct and indirect tax burden on the people.
Some of the main sources:
1. d. Full dentex; "National Development Plan for the years 2013- 2017" Published in multiple sites and newspapers.
2. Law No. () for the year 2014, "the budget of the Federal Republic of Iraq for fiscal year 2015".
3. See Source No. 1 above.
4. See Source No. 2, above.
5. See Source No. 2 above.
6. d. Full dentex; "rentier and sustainable development of the Iraqi economy," an article published in 2011.
(*) Formerly a regional adviser to the United Nations.
Copyright network Iraqi economists 8/1 / 2015 Permission to quote and re-publication, provided that the source
Dr. Do not you think it is better now that the state is to float the dollar as this procedure could activate the industrial and agricultural sector. What is the benefit of maintaining a constant dollar price if this works to revitalize the local product import account. Do you think Dr. CBI is able to maintain the dollar's exchange with all of these economic risks price ..
I answer to the above questions, and thank you.
Dear outlined pink stones on the questions as follows:
1. If the float of the Iraqi dinar, Vstthalk its purchasing power and standard of living of ordinary people become rickety level due to high prices then, especially since domestic production is scarce. And it becomes a great dependence on imports.
2. When imported goods Pushing would be the dollar, if the dollar exchange rate has become or will become low, the amount of dinars paid dinar will double, instead of 1122 dinars to the dollar, could rise to 50,000 dinars to the dollar, and of course we will have inflation Falt Oanvjari will become people's lives prohibitively expensive actually.
3. What was the central bank is doing and still is trying to maintain or at least install the dinar exchange rate to the dollar, to spare citizens distemper collapse of the purchasing power of the Iraqi money ..
4. Valtauam requires that you have a production base that can compete with goods Almistorhn Vine is now in Iraq?
5. How activates the agricultural sector or the industrial and production costs, especially expensive imported materials Iraqi dinar? As the imported goods will be cheaper, and therefore the expansion of local production will be difficult.
6. Central Bank Bgdarh DZ Shabibi was trying to preserve the purchasing power of the Iraqi currency, and that he was selling the dollar in auctions over the dinar was introduced and withdrawn from the market to strengthen its purchasing power against the dollar.
No flotation conditions is now available in the Iraqi Aafqatsad. Thank you
Thank you Doctor.
God, your words correctly. But I think he now fares do not Eogod fact to face the economic crisis and all that is happening is prosthesis solutions. For example, because the process of import cars are in abundance and it hurts especially the Iraqi economy and you know that Iraq imports more than 60% of the petroleum products from abroad, and that because of the ability of refiners Limited in Iraq. Means to float the dollar will be, but not the will of the central bank is now the price of oil to $ 50 cost of extraction in Iraq said high as $ 21 more and you can be sure of the number. The Central Bank can not maintain a fixed exchange rate under conditions so? Imposition of taxes does not solve the problem, but should stop the import of certain goods such as cars, for example, and the trend towards increased production of refining refineries.
Should work now in order to save the Iraqi economy and this is Msalatkm Dear Dr. Tstieion through educating people first through economic seminars.
The International Energy Agency announced that the United States will become the largest exporter of oil in 2017 by 13 million barrels as the oil shale production costs fell to US $ 75 now. Moreover, the search for alternative oil Gary afoot energy. The European Union has now taken the decision that is run media shipping gas, produces a quarter of Britain's electricity from wind now. It's the product life cycle for oil, This is my opinion, and excuse me, I'm not an accountant and economist, and you know me economy, I think it's high oil prices pushed the producer countries to look for alternatives.
Iraqis, we think the economic future of Iraq now.
Thank you Doctor full dentex.
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