Will the country see a change in the federal budget for 2024?

Will the country see a change in the federal budget for 2024?

12-21-2023

Dr. Basil Abbas Khudair…
Although our country went through years devoid of federal budgets before and after 2003, this is the first time that we witness the preparation and implementation of a federal budget for three years (2023, 2024, 2025), as it actually came into effect on 1/1/2023 after it was issued pursuant to Law 13 of the year 2023, and one of the most prominent justifications for preparing the three-year budget was to make better use of resources and get rid of the phenomenon of issuing a budget that begins with a deficit and ends with a surplus, in which most citizens do not see the impact of spending tens of billions of dollars annually on their public or private situation, in addition to getting rid of the complex of conflicts, budget bidding, and delays. It was discussed and voted on in the House of Representatives, and despite the delay in issuing the current budget for six months and in the manner in which it was viewed by the public, it has turned into a current reality and must be implemented despite the appeals submitted by the Council of Ministers that accompanied its issuance. They were all resolved by acceptance or rejection by the Federal Court and nothing remains. Except for Article 71, the ruling on which was postponed until the beginning of next year. The question that comes to some people is whether this budget is fixed and unchangeable, such that it is repeated with the same 2023 numbers year after year for three years? And if it remains static and does not move from its stasis, then where is the development, growth and change in the areas that are new and contain paragraphs in spending or revenue, increase or decrease? The answer is that Paragraph (Second) of Article (4) of the Federal Financial Management Law No. 6 of 2019, which was relied upon in issuing the three-year budget, clearly indicated this, as it stated: (The annual budget begins on 1/1 and ends on 31/ 12 of the same year, and the Federal Ministry of Finance has the right to prepare a medium-term budget for a period of 3 three years, which is presented once and legislated, and the first year is obligatory, and the Council of Ministers, based on a proposal from the Ministries of Planning and Finance, may amend it for the second and third years and with the approval of the House of Representatives), and despite the flexibility in this text that indicates that It is obligatory for the first year, but it did not stipulate that it is obligatory to amend it for the second and third years. Rather, the matter was left permissibly (but not obligatory) for the Council of Ministers to amend based on the proposal of the Ministries of Finance and Planning, and although Article (1) of the same law specified the dates and mechanisms for forecasts of all kinds to be for a period Three years and (thereafter) by the parties specifically specified, and although we are in the last days of the year 2023, the issue of amending the budget regarding its expenditures and revenues for the year 2024 has not been discussed. The issue suggests (until today) that the 2024 budget will remain as it is. Which was included in the 2023 budget without the need for amending legislation from Parliament.

Some believe that there are several justifications and necessities for making amendments to the federal budget for the year 2024 and for many reasons, the first of which is the potential difference in oil revenues. The budget assumed the price of a barrel of oil at 70 US dollars and an export (sale) rate of 3.5 million barrels per day, while the break-even price of oil to cover All expenditures actually amount to $112 per barrel, and this will lead to a financial deficit of $39.7 billion, representing 14.3% of the gross domestic product and equivalent to nearly half of the record reserves accumulated during the years 2021-2022 resulting from oil price differences between what was stated in the budget and the actual revenues from Export, and if the budget expenditures are implemented in full, it may lead to the rapid depletion of oil gains and renewed financial pressures, in light of the current instability in global oil prices below $80 per barrel, in addition to the reduction of Iraq’s share under the OPEC + agreement, and the problems of exporting the Kurdistan region’s oil from The Turkish outlets have been suspended and have not been resolved for several months, and the second is the increase in operational expenses after the appointments, which included up to a million, whether with new appointments or by transferring them from procedures and contracts to permanent ones, in addition to including new categories in the social protection program and granting allocations to some categories of retired workers, employees, and military personnel, and the reason is The third is the end of the governorate council elections that were held on the 18th of this month, which produces elected governorate councils and original governors, and what results from that is the governorates demanding their full allocations from the investment and operational budgets and their accumulated shares of petro-dollars and the development of the regions to provide services to citizens as an attempt to confirm their worth before the public. Without forgetting that most of the winners represent blocs and parties whose interests are to prove their existence in preparation for the parliamentary elections in 2025. The other reason is the continued discrepancy between the official exchange rates and the black market, as this results in inflation and an increase in prices and the government’s loss of part of the revenues in the budget. The state’s exchange units are forced to spend domestically according to the prices prevailing in the markets, which are affected to a known extent by the parallel exchange rate in the markets, and the remnants of the rentier economy remain among the major problems facing the state. In this context, Mr. Ali Al-Alaq, Governor of the Central Bank of Iraq, says (that the deficit figure is not The oil price exceeds 80%, which threatens the state’s financial situation, indicating that the government cannot redistribute income within existing tools.

According to part of the World Bank’s report on the Iraqi economy, it is useful to employ political and security stability to bring about breakthroughs in the field of development and investment to satisfy the reform desire that the country may be witnessing due to political competition. Economic prospects are still subject to great risks, largely due to the challenges. Deep structural, the high dependence on oil makes the economy vulnerable to shocks in the oil markets and global demand, and this is evident through the current decline in oil prices, in addition to the reflection of pre-existing fragility, including the high prevalence of corruption, the low participation of national human resources, especially females, in the field of income production, and the high The prevalence of the informal sector within the private sector, and because Article 4 of the Financial Management Law gave flexibility in amending the budget after the first mandatory year and did not set timings for amendment under legislation approved by the House of Representatives, it is expected that the Council of Ministers will not resort to requesting legislation for fundamental amendments to the 2024 budget. Except in the case of urgent emergency based on the request of the Ministries of Planning and Finance, and the reason for this belief is the existence of a financial abundance of financial allocations for the year 2023 after the delay in issuing budget implementation instructions and the delay in releasing the allocations, as only specific percentages of them were spent out of their total to cover some expenses, including governing expenses. Of salaries, rations, protection and social services, and for the purpose of completing existing projects, the completion of which was delayed during the presence of the caretaker government due to its limited financial powers, and in the event that the government is exposed to situations that require increased spending under pressure from the provincial councils and other pressures demanding fairness in employee payments by pushing for accelerating the adjustment of the salary scale or increasing salaries. pension, increase in appointments, decrease in oil revenues, or other matters, most of the treatments will be transfers according to the schedules and according to the powers mentioned in the effective budget law, and in all cases, the request to amend the budget by increase or decrease will remain a right that the government can resort to. To meet the necessities, and what supports the shrinking size of the necessities is the positive aspect in the field of relative stability in the internal political conditions with regard to the formation of the federal government and local governments, it is supposed to pave the way for more investment in the economy, and it could be for the measures taken by the current Council of Ministers with regard to reform Aspects of financial and monetary policies and other measures in the service field, and some reforms within the framework of stimulating electronic payment and others, have had an impact in increasing growth in the domestic product, albeit in a limited manner.

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