Economists: Any budget that depends on the rentier economy is doomed to failure

Economists: Any budget that depends on the rentier economy is doomed to failure

2023-03-20 02:27

Economists - Any budget that depends on the rentier economy is doomed to failureShafaq News/ Iraqi economists predicted, on Monday, that the fate of any budget that relies on the rentier economy will be failure and an increase in the deficit.

“It is difficult to define a single scenario for a budget for more than a year, in light of a rentier economy that depends on oil as the country’s only resource,” economist Dergham Muhammad Ali said, in an interview with Shafaq News agency.

And he indicated that “the safest scenario is to set a multi-scenario budget, a pessimistic scenario that depends on a low oil price, a moderate scenario that depends on an average barrel price that is close to the current one, and an optimistic scenario. Expenditure accounts are placed on these three scenarios and are determined in light of allocations, the value of the deficit, and the mechanisms to bridge this deficit.”

He added, “The budget in its current form is threatened with failure in the event of a deterioration in oil prices, which is an expected scenario, which will make it difficult to implement the budget paragraphs.”

For his part, the financial and economic expert Hilal Al-Taan considered, in his interview with Shafaq News agency, that “it is not possible to predict future oil prices because oil is a political and economic commodity that is subject to the laws of external and not internal supply and demand, and therefore the problem of the Iraqi economy is that it is a rentier that depends on oil by 93% by achieving budget revenues.

Al-Taan indicated that “this matter is considered a mistake in fiscal policy, despite our assurances in previous years, since 2003 until now, that it is necessary to reduce dependence on oil as a main resource for the budget and rely on other non-oil resources that include taxes, customs, state real estate revenues, and encouraging the productive and agricultural sector.” industry and reduce imports.

He stressed that “until now, there has been no development and oil is still the main source in the budget, and therefore the assumption of a price of 70 dollars per barrel in the budget is a large and dangerous number in light of the unstable conditions in the world, and this will cause embarrassment to the state.”

He pointed out that “the budget is currently talking about the existence of 63 trillion dinars as a deficit in light of setting the price of 70 dollars per barrel of oil in the budget, and in the event that oil prices drop from what has been determined in the budget, which is what is happening now, this will lead to a disaster as the deficit will exceed 100 trillion.” dinars, and therefore it is difficult to cover the budget, and the coverage will take place again, either by borrowing from abroad, which is difficult, or relying on internal debt from the central bank or commercial banks, and then we will suffer a real problem after that.

Al-Taan called on the government, “the need to reconsider the budget in terms of setting a new price for oil that protects it from global oil fluctuations, and to reduce and pressure unnecessary public expenditures in state departments. There are also incorrect concessions that must be reduced by a courageous and decisive decision.”

It is noteworthy that oil prices fell again today, Monday, after rising this morning, with Brent recording losses amounting to more than 2%, and approaching the price of 70 dollars.