PM Advisor: Tax deposits are part of the budget
Baghdad-INA
Prime Minister's financial advisor, Mazhar Mohammed Saleh, confirmed on Friday that tax deposits are part of the budget that can be used to adjust government spending, while specifying the financial scope for government spending from tax deposits.
"The world is living in a state of anticipation for fear of entering a phase of economic contraction, and then a major economic depression. This phase takes six months during which growth and unemployment levels in the global economy are monitored," Saleh told the Iraqi News Agency (INA). He pointed out that "Iraq is an important part of the world's energy system. A 1% drop in the world's GDP will undoubtedly lead to a half-percent drop in demand for oil, leading to a glut in supply, which requires a cautious policy from OPEC+ to help the group's countries protect their financial budgets for 2025 and the beginnings of the next fiscal year 2026."
He added that 'a precise technical precaution to confront the oil asset cycle was assumed by the legislator when approving the three-year federal general budget (Law No. 13 of 2023 as amended) by adopting a conservative oil price of $70 per barrel of exported oil and with the export of 3.4 million barrels of oil per day,' indicating that 'this precaution is in two directions: the first is spending with a comfortable budget, but at the minimum possible limit of 160 trillion dinars annually instead of 200 trillion dinars annually, and the second direction: spending at the maximum limit while reserve with a maximum annual deficit of 64 trillion dinars.'
Saleh continued, "In the 2024 budget, spending was within the comfortable minimum of 156 trillion dinars, with an average oil price of around $75 per barrel. This spending covered the entire operating budget, including salaries, wages, pensions, social care, and support, in addition to spending on more than 8,000 suspended government investment and service projects." He pointed out that "government borrowing, most of which is from domestic borrowing sources, recorded a financing indicator in the budget deficit of 7.6% of GDP, compared to 1.3% in 2023."
He pointed out that "if oil prices fall to an annual average of $60, which is the maximum possibility in the 2025 budget, there are two options: either spending around 130 trillion dinars and maintaining the same deficit-to-GDP ratio as in 2024, or spending up to a ceiling of 156 trillion dinars and accepting actual bond borrowing that rises to 9% of GDP in order to secure salaries, wages, pensions, social care, support, and spending on service projects without interruption, taking into account the drop in oil prices and the two-fold contraction in GDP growth."
Saleh pointed out that these are "the expected possible options unless the oil asset cycle improves, which in all cases depends on the upcoming OPEC+ policies regarding the future of production limits and the review of member quotas, as well as the development of the geopolitical situation in the world, especially in the Russian-Ukrainian war and the development of the situation in the Mediterranean Basin region, as the Gulf region is responsible for exporting nearly 40% of global crude oil exports, and this is reflected in the fluctuations in energy prices in global markets, including crude oil markets."
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