Where does the Iraqi oil revenue surplus go?
Where does the Iraqi oil revenue surplus go?
In early April 2021, the House of Representatives approved the state’s general federal budget for the same year, and as soon as the budget was approved, international oil prices began to rise with the decline in the severity of the Corona outbreak and the world’s recovery gradually from the repercussions of the pandemic,
and in conjunction with that, the exchange rate of the US dollar rose against the Iraqi dinar, which is
Which means a surplus in the revenues of the Iraqi state, and thus raises questions about the aspects of spending these amounts.
The federal budget approved by the Council in its session on 1/4/2021, amounts to 127 trillion Iraqi dinars (about 88 billion dollars), and a deficit of more than 18 million, while the price of a barrel of oil was calculated at 45 dollars per barrel, with an export rate of 3.25 million barrels per day, and the exchange rate of the dinar against the dollar was calculated at 1450 dinars per one US dollar.
Today, about 3 months after approving the budget, the price of a barrel of oil in global markets exceeded the barrier of 75 dollars per barrel, while the exchange rate of the dollar against the dinar remained between 1470 and 1500 without settling on 1450 dinars to the dollar, which was approved by the Federal Budget Law, and
this means that there are funds Surplus will be returned to the state treasury,
what is the size of this money?
What are the ways in which the government will dispose of this money?,
especially since there are demands for citizens to be the first beneficiaries of this money.
Strengthening the monetary reserve of the central bank
After the outbreak of the Corona pandemic and its impact on the global economy, Iraq was also affected economically, which prompted the government to borrow from the central bank and thus decreased the cash reserve of the central bank,
which means that the government has to compensate for the shortfall in the cash reserve, which is what the government actually started with with the high prices Oil, says a member of the Parliamentary Finance Committee, Representative Jamal Kougar
Representative Jamal Cougar told PUKmedia , so far, the government's steps to benefit from these amounts are to strengthen the bank reserves, as they have fallen to very low levels from 82 billion dollars to less than 55 billion dollars,
adding that now they are being strengthened and I think it has reached above 60 billion dollars.
Representative Jamal Kojer believes that this is one of the options for disbursing the surplus funds,
noting that the government can dispose of this money to pay the internal and external loans owed on it, including loans that are due, or when it is time to pay them, so they can benefit from these amounts to pay them, especially those loans that have been delayed such as the Iranian loan By purchasing gas for electric stations, and similar loans.
There is a third option for the government of Prime Minister Mustafa Al-Kazemi to deal with this surplus money, which, according to MP Jamal Kougar, is to present a supplementary budget,
but he excludes the government from taking this measure for two main reasons,
the first of which is that the government has not yet been able to spend the federal budget for the current year, as 80% of these The budget has not been spent yet,
adding that the supplementary budget is going to it if there are many deficiencies in the existing budget and there is a great financial abundance.
The government will present another budget for the missing paragraphs in the existing budget to take advantage of those amounts.
As for the second reason for excluding presenting a supplementary budget, MP Cougar continues, that this budget needs to be prepared and then sent to the House of Representatives, and the House needs to hold sessions in the Parliamentary Finance Committee with the participation of the rest of the committees, communicate with the ministries, make a first reading and then a second reading and vote on it,
we believe the government She will not go for this option while she is now busy preparing a draft budget law for 2022, stressing that
preparing the supplementary budget needs time to prepare, discuss it in the parliament and vote on it, and
we are heading to elections, which have become the preoccupation of many deputies nominated for an upcoming election cycle,
thus completing the quorum and reading the draft The budget law is a first and second reading and voting on it needs to complete the quorum.
I think this is very difficult in the next stage.
The law grants Al-Kazemi the right to determine the terms of disbursement of these funds
The legal expert, Mosaddeq Adel, and in an interview with PUKmedia , confirms that the constitution and the law do not specify the aspects of spending this surplus, and therefore the federal government disposes of part of it to finance the deficit and the rest is outside financing the budget deficit, stressing that
there is no text in the budget law nor the financial management law that specifies the aspects of spending this money.
The legal expert, Mosaddeq Adel, adds that this issue does not involve any legal officer, and the disbursement of this money remains at the discretion of the government,
and it is not restricted to specific exchange aspects of this money, whether it is handed over to the Central Bank to fill the shortfall in the cash reserve or spend it in another way, stressing that
the Federal Prime Minister is one of the He decides the terms of disbursement of these amounts and
the law never obliges him to do anything with regard to their disbursement.
The investment was made from the reserves of the Central Bank
Compensating the Central Bank’s reserves from the surplus funds is not accepted by experts and economic analysts, who demand that this money be spent to implement investment projects and to achieve job opportunities for the unemployed, and that this money be employed in providing services to citizens, stressing that
the Central Bank can compensate for the shortage in its reserves from currency exchange operations..
Economic analyst Abdul-Hassan Al-Shammari told PUKmedia , when the budget law was approved, the price of a barrel of oil was below $40, and the Iraqi state was in a situation in which it might not be able to pay the salaries of employees, especially since the huge number of employees took all the budget resources,
but when the price of the US dollar was raised Against the Iraqi dinar, this achieved for Iraq 13 trillion dinars, covering all salaries, and this is a very important aspect.
Al-Shammari adds that when the government approved the budget, it did not know that oil prices will rise when the world recovers from the Corona virus and the demand for oil increases, and the price of a barrel of oil rises to 76 dollars,
noting that now the budget has been approved and the difference between the two prices when the budget is approved and now this will constitute a cash surplus.
It exceeds 35 billion dollars and may reach 40 billion dollars, and the budget deficit is about 18 billion dollars, meaning that the rest is between 15 to 22 billion dollars.
Al-Shammari believes that this amount is either added to the monetary mass in the central bank, or there is a supplementary budget and it is exclusively an investment because we do not need an operational budget because the operating budget is full of resources,
and when the budget is an investment, it is possible to build infrastructure in Iraq and complete suspended projects, especially whose completion rate exceeded 50%, and this is another aspect of disbursing this amount,
noting that there is another matter that these huge funds are invested in industrial and agricultural projects to provide job opportunities for the unemployed and eliminate poverty in Iraq,
especially since the country suffers from extreme poverty due to The floundering policy of the Iraqi government.
Al-Shammari stresses the need to seek the assistance of economists to develop a real plan in order to provide job opportunities for the unemployed and eradicate poverty in Iraq, even at a certain percentage,
pointing out that the government has two options, either the sums will be transferred to the 2022 budget and I think this cannot be implemented because the law confirms the disbursement of annual resources every year. during the same year.
He added that if the amount is not recycled for the next year’s budget, there must be a supplementary budget, and this is correct, and this budget is spent on projects, and
if the year ends and this money has not been utilized, it must then be added to the monetary block of the Central Bank, which currently amounts to about 50 billion. dollars to rise with the amount added to it, and I believe that the surplus amount will exceed 22 billion dollars.
The economist Bassem Jamil Antoine, for his part, stresses that the first aspect of spending this money should be investment.
He tells PUKmedia, that the first outlet for spending this amount is the investment door, as it expands investment to create job opportunities for the unemployed, and not to waste these surpluses and cover the deficit.
What is in the budget, and that is better than borrowing external loans and paying the interests of these loans, wondering, but where is the mind in this?
The rampant corruption, waste and mismanagement are all factors that have led to the deterioration of the economic situation in the country.
Bassem Antoine refuses to let this money go to the central bank, explaining that these surpluses are not for the central bank, they are for the Federal Ministry of Finance,
the central bank is in the process of changing the currency from the dollar to the dinar and this money remains for the finance, indicating that the central bank makes profit through a certain percentage of the exchange and its role
It is to control the monetary process, not the financial, explaining that the bank’s reserves rise in cases such as that the Ministry of Oil deals in dollars and spends it at the central bank, which receives the dollar and delivers the ministry in dinars,
and in this case the surplus of the currency difference is added to the central bank’s reserves,
noting that The monetary reserve of the central bank has decreased as a result of government borrowing from the central bank.
The economic expert, Basem Antoine, draws attention during his talk to the suspended projects in Iraq and the debts of the private sector owed by the government, as he confirms that there are thousands of suspended projects and there are debts of the private sector, and with this money it is possible to pay these debts and implement the suspended projects, which number 6 thousand projects, explaining
There are debts to the private sector of more than 30 trillion dinars, and the government must pay it off so that it can create job opportunities for the unemployed and the youth,
stressing the efficient management of funds required to achieve balance and disbursement of this money in the correct ways without paying interest on it, but rather to get rid of part of the debt with this money.
Citizens demand their share of this money
PUKmedia met with a number of citizens from central and southern Iraq, where they had demands such as returning the dinar exchange rate to what it was before, and that part of the citizens' surplus funds be disbursed directly.
Ahmed Ali, a citizen of Baghdad, says that when the budget law was voted on in Parliament, the budget determines that the price of a barrel of oil is 45 dollars per barrel,
now the price of a barrel is 75 dollars, the questions here we ask as citizens, where does the money from oil imports go?
Which amounts to $30 per barrel of oil, and why when the price of oil drops globally, the government cuts salaries and the crisis falls on the shoulders of the citizens who are basically going through economic and financial crises.
He adds that when the price of oil goes up, its money goes to the pockets of the parties and the corrupt, and when the price of a barrel of oil drops, the citizen becomes pliers and scapegoats in order to strengthen the national economy,
stressing that whoever leads the authority at the present time, can find political and economic problems and is unable to solve them, so must He must leave and give the opportunity to those who are better and able to find appropriate solutions and get out of this bitter reality, as he put it.
Hadi Mahdi, a citizen of Diyala province, says everyone knows that the Iraqi government approved the budget at a price of 45 dollars per barrel of oil, but now the price of a barrel has exceeded 75 dollars.
He added that the dollar price is supposed to be reduced on the grounds that it is he who caused the harm to the entire people, and therefore there will be an equal distribution of this amount across all Iraqi governorates.
Distributing the amount in the implementation of service projects such as paving streets and constructing bridges and other services, and I do not think that this will meet all the needs of the citizen.
He asserts that the Iraqi citizen today is in dire need of reducing the dollar because every Iraqi citizen was affected by the price hike process,
and we demand the return of the exchange rate of the dollar against the dinar to 1300 dinars for you at least one dollar and not as it was in the past at 1200 dinars per dollar.
Citizenship Salwa Karim demanded the distribution of this money to the citizens directly, as she says that these amounts should be for the citizen, the government can distribute them as an increase in the salaries of employees for a month and at a uniform rate,
noting that this money can also be invested in improving electrical energy and contracting with companies that provide generators Electricity is huge and contributes to increasing energy production across the country.
And she adds, I am not with the fact that the amount is deposited in the central bank because decreasing the price of the dinar against the dollar will bring the bank an increase in its cash reserves and it does not need this amount,
the amount, according to what we hear from economists, is more than 15 billion dollars,
this amount even if it is not added to salaries The staff, nor the improvement of electricity, could build a large, advanced hospital in the capital, Baghdad, that would be a destination for all Iraqis for treatment without the need to travel to neighboring countries and bear the trouble of traveling and increasing expenses and costs.
PUKmedia / Faeq Yazidi