IMF expects a “significant increase” in the 2015 budget deficit and propose “drastic measures” to reduce it
IMF expects a “significant increase” in the 2015 budget deficit and propose “drastic measures” to reduce it
3.21.2015 one four a.m.
Long-Presse / Baghdad
International Monetary Fund forecast, on Friday, the high proportion of the deficit in the budget of 2015 to more than the 12 percent announced by the government, to “significantly higher levels”, due to lower oil prices, and the weakness of the possibility of Iraq’s commitment to export 3.3 million barrels per day, and assume the budget, Proposed implementation of reform measures include strict austerity in investment projects, and a commitment to reducing expenses, and reconsider the limits of central bank sales of the currency, referring to the overall growth contraction, and the prospect of rising inflation slightly the end of this year.
The IMF said in a statement, issued by the Chairman of the negotiating mission with Iraqi authorities (Carlo Sdralvić), following a round of negotiations included the ministers of oil and finance Iraqis, and the Governor of the Central Bank, and Iraqi officials in Amman, Jordan, which ended last week, and received a (long-Presse) a copy of it “The budget of 2015 (Iraqi) assumes achieve exports of 3.3 million barrels per day at a price of $ 56 a barrel, and therefore include increases in non-oil tax and strives to contain spending through measures such as the application of compulsory savings on the wages of civil servants, however, given the the massive drop in oil revenues, the budget is still expecting a deficit of almost 12% of GDP. ”
He added, “In the more conservative oil revenue assumptions, taking into account the payments due to international oil companies, which are not listed by the budget, it is very probable that the deficit up to much higher levels and to address this negative possibility, the government is committed to the implementation of less than budgeted expenses when you need to exercise Accuracy in cash management and rationalization of capital investment and defer some investment projects. ”
Fund stressed in his statement that “the matter requires further fiscal consolidation through measures on both sides of revenues and expenditures to contain the budget 2015 deficit commensurate with funding constraints, and ease the pressure on the domestic banking system, and to reduce domestic demand to contain the decline in international reserves, and should be fiscal adjustment measures be permanent until underpin the sustainability of public finances and the external accounts situation in the medium term, which would be of great importance in view of the weakness of the prospects for oil prices. ”
And the “foreign exchange market stable has been in 2014 after the steps taken by the Central Bank to edit that, and to reduce the difference with the parallel market to 3.5% at the end of the year, but the authorities should reconsider the limits of the sales of the Central Bank’s foreign exchange and collection of customs duties through commercial banks, where these measures are already causing pumping to restrict foreign exchange to the Iraqi economy and led to the arrival of the parallel market prices to record levels in recent weeks. ”
The statement pointed out that “moving forward in the re-structuring of the Rafidain and Rasheed state-owned, is also taking steps to open government business in front of banks and the private sector, and the introduction of a number of essential elements of the infrastructure of the financial system, such as the establishment of a system of deposit insurance and credit bureau as well as the growth Ctoaúa and diverse economic in the medium term will depend on a wide range of reforms, including state-owned enterprises, and the energy sector, and labor markets, and improvements in the business climate and governance. ”
He continued, “due to a decline in economic activity in the occupied territories of the organization” Daash “and rigidity of government spending, estimated to shrink GDP growth by more than 2% in 2014 and is expected to come back to rise a little more than 1% this year.”
“The inflation recorded rates low beyond the control of the” Daash “regions, where it was less than 2% at the end of 2014, but it may rise after the lifting of customs duties and procedures,” asserting that “the CBI international reserves fell from $ 78 billion in the end of 2013 to $ 66 billion at the end due to lower oil revenues and the high level of imports, “noting” and reflects the level of international reserves at the end of 2014, the Development Fund for Iraq of $ 0.7 billion and the balance of which was converted to Baghdad at the end of last May. ”
The statement emphasized that “Daash attacks did not lead to stop the expansion of the oil sector of each oil-producing regions, exports are expected to rise from 2.5 million barrels per day in 2014 to 3.1 million this year, taking advantage of the agreement with the Kurdistan region.”
The statement continued, “The external shock, which was accompanied by pressure to spend on security and humanitarian requirements, the burden on the overall financial performance. In 2014, the financial base of the activation due to lack of credit balance, which helped to contain spending in less than 2013 levels, limits, and as a result Therefore, it is estimated that the budget deficit of about 3% of GDP, down from 6% of GDP in 2013, but this result was due in part to the postponement of investment spending and the suspension of conversion of the budget to the Kurdistan Regional Government, as well as accumulated arrears due to international oil companies. Most of the deficit is financed by borrowing from the internal state-owned banks. ”
The mission, according to the statement, to “the Fund’s readiness to support the Iraqi authorities through increased cooperation in terms of policies, and technical assistance, in addition to financial support when needed.”
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