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FT: Iraq is on the verge of a disaster

Category: Economy

Date: 2020-07-26T11:12:46+0000
FT: Iraq is on the verge of a disaster

Shafaq News / Financial Times, British newspaper, warned of the high levels of poverty in Iraq, while it saw that low oil prices leave the Iraqi government only a small room for maneuver.

"

The financial situation in Iraq, the second largest oil producer in OPEC, has suffered from a devastating blow as crude oil prices have fallen by more than half compared to last year," said Chloe Corniche, Middle East reporter for the Financial Times, in a report viewed by Shafaq News agency.

The author referred to Oxford Institute for Energy Studies in Britain, to track the decline in Iraqi revenues from oil exports, from 6.1 billion dollars last January to the lowest levels at 1.4 billion dollars last April.

Consequently, the poverty rates in the country, as by the report, are expected to rise to 31.7 percent this year, from 20 percent in 2018, as COVID-19 pandemic is pushing 4.5 million Iraqi down the poverty line, according to a new joint evaluation for the government, the United Nations, the World Bank and Oxford.

The author says that plunging oil prices has left the government with little room to maneuver. However, the government, according to analysts she quoted, can tap $68bn of foreign reserves to cover bills in dollars, such as imports and debt servicing, and is expected to borrow $18bn domestically and abroad to cover government wages for the next few months.

The author quotes the Iraqi Minister of Finance, Ali Allawi, "the issues which were buried because of the large and growing oil revenues are crystallizing now", referring to bloated spending and a monthly wage bill of $5bn for its vast public payroll. This includes payments for an estimated 300,000 "ghosts" or fictional employees, according to Allawi.

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There is now a growing recognition that we are moving to an environment with relatively low oil prices.. It is really imposed on to find an alternative to restructure our public finances, to take account of this new normal," Allawi added.

The Iraqi Minister concluded that Iraq, "has been holding regular and very intense discussions with the International Monetary Fund for some time now," explaining that Baghdad, "may apply for some budget support."

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