ERBIL, Kurdistan Region – The Iraqi government will not move forward with a budget for 2020 and will instead focus on formulating a budget for 2021, Finance Minister Ali Allawi said on Sunday.
Allawi told Iraqi state media outlet INA that the decision has been made due to the drop in oil prices.
Allawi also revealed that the Iraqi government is planning to receive loans from the World Bank to weather the current economic crisis.
Iraqi Prime Minister Mustafa al-Kadhimi led a meeting of his newly-formed cabinet on Sunday, in which he called on all parties to unite and work to “overcome the current crisis facing Iraq.”
Each year sees a tedious and prolonged debate over Baghdad’s federal budget, and with each passing week apprehension rises over the disaster that could unfold if an agreement can’t be reached. It has happened once before – in 2014, when a budget deal couldn’t be made as a result of low oil prices.
The COVID-19 pandemic and lockdown measures have seen oil prices plummet – a disaster for Iraq, with 90 percent of government expenditure derived from oil revenues, according to data from the UK-based Iraq Energy Institute.
Economic strife was one of several grievances driving Iraqis onto the streets late last year. Initial calls for reform centered around unemployment and dissatisfaction with the Iraqi political elite who have dominated Baghdad since 2003, and soon evolved into calls for complete governmental change.
A drop in oil prices in 2014 and the ensuing failure to implement a budget saw the Kurdistan Region’s share of Iraq’s annual budget reduced to zero. Salaries of senior governmental employees were also cut by almost half.
A similar crisis is now taking place, with a global collapse in oil prices sending revenues plummeting in March and April as economies shrank amid the coronavirus pandemic.
Iraq’s oil revenues for the month of May were $2.09 billion, with an average export of 3.21 million barrels per day (bpd), a slight increase compared to April.
Iraq’s oil revenues for the month of April were $1.423 billion, with an average export of 3.427 bpd.
Meanwhile, a barrel of Iraqi oil sold for an average of $21.01 on May, up from $13.80 in April.
The slight increase in oil global prices came after Moscow and Riyadh reached a deal on April 12 to cut oil production by 9.7 million bpd – equivalent to 10 percent of the world’s daily supply – for May and June. However, global demand remains much lower than average.
