Thursday, May 21, 2009

Going Into Debt To Cover Budget Deficit



For more on Iraq's budget see:

Falling Oil Revenues, and Uneven Production

Baghdad Failing To Invest In Its Future

Presidential Council Vetoes 2009 Budget


Iraq's Budget Stalled

How Are The Current Provincial Councils Doing?

Iraq Revises Budget Once Again

Iraq Cuts Budget

Are Budget Cuts Ahead For Iraq?

Iraq's New Budget Woes

Iraq Cuts Its 2009 Budget, But Still Can't Spend It

NY Times Finds Iraq Spends Even Less Of Its Budget

GAO August 2008 Report On Iraq's Budget And Spending














Anonymous said...

Excuse my ignorance, but why can't Iraq use the foreign reserves? The link said it had something to do with adverse effects on the economy...but surely now is when the money is needed most?

motown67 said...

The Central Bank said by law they are independent of parliament and therefore are not obligated to cover the budget. They then turned down the parliament's request to use the reserves. The Finance Ministry told parliament the same thing.

motown67 said...


The senior Consultant in the Central Bank of Iraq, Mudher Mohammed Saleh ... added that Iraq's stockpiles of reserved funds have been covered by cash during the past years, and so it is out of the financial authority of the Government.


Salih pointed out that the law prevents the government from imposing its policies on the Central Bank of Iraq, asserting that the Central Bank of Iraq Law No. 56 year 2004, has granted the Bank a full autonomy from the government, that not to provide any loans to the Government, and not to receive orders from the government in the formation of its policies, and its accounts comply to the international standards.

This is why this situation seems like a fiasco.

The budget was based upon 2 mil/bar/day in oil exports at $50 each. Parliament was told they wouldn't get near that mark anytime soon but passed the budget anyway. In the first 3rd of the year the Oil Ministry hasn't reached those marks so officials knew they were going to run a deficit, initially reported at about $15 bil.

Every single report I read said parliament just expected the surplus from previous budgets to cover this difference. Then the central bank and the Finance Ministry tells them they can't use the money after the budget's past

That seems like either parliament didn't know the rules on the money or didn't ask the bank beforehand whether they could use the money, or worse were misled by the bank and Finance into thinking that they could use it. Either way it seems like a major screw up.

Since the invasion reducing Iraq's debt has been a major goal of the U.S. and Baghdad so that as much money as possible could be spent on the budget and reconstruction. Now they're going to have to add new debt to cover the budget if they get an IMF loan.

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