$25.8b Deficit in Iraq Budget

$25.8b Deficit in Iraq Budget$25.8b Deficit in Iraq Budget

Iraq's Finance Ministry has proposed a 2016 government budget worth $99.65 billion (113.5 trillion Iraqi dinars) with a budget deficit of $25.81 billion, according to a draft posted online on Wednesday.

The budget forecasts oil at around $45 a barrel and average production of 3.6 million barrels per day, up from the current rate of about 3 million bpd, Reuters reported. As the holder of the world's fifth biggest reserves, oil accounts for around 40% of gross domestic product and more than 90% of fiscal and current external receipts.

The 2016 budget assumes the continuation of a deal with the Kurdistan Regional Government, or KRG, over oil revenues, under which KRG agreed to transfer up to 550,000 barrels per day to Iraq's state oil firm SOMO in exchange for Baghdad granting Erbil 17% of the country's budget payments.

However, KRG cut allocations to SOMO in June and has steadily increased independent crude oil sales via a pipeline to Turkey, effectively undoing the deal.

Southern oilfields, which account for more than 85% of production, are far from areas controlled by Islamic State militants in the north and west. But revenues have been plagued by the more than halving of global oil prices in the past year.

Iraq's deficit is also aggravated by higher military expenditures and other costs associated with the fight against IS, whose advance has internally displaced more than 3 million people according to UN statistics.