Calls for calculating 2009 budget in light of low oil prices

BAGHDAD / IraqiNews.com: An Iraqi economist on Saturday called on the finance ministry to calculate the 2009 budget while taking into account a possible decline in oil prices due to recession expected if the financial turmoil continues. “The low prices that caused the rate of an oil barrel to go below $80 were the outcome of expectations for a decrease in demand over oil due to the financial crunch that, if continued, could hurl the United States and the capitalist economy to recession,” Majed al-Souri told IraqiNews.com. Oil prices spiraled down, bringing American light crude to plummet to a record low of $80 in a year. The finance ministry’s budget department had announced in September 2008 that it has finalized Iraq’s 2009 budget based on approving the sum of $80 per barrel at an export capacity of 2 million barrels per day (bpd) with a total value of 94.665 trillion Iraqi dinars ($70.88 billion), distributed over $60.26 billion for operational expenditure and $18.62 billion for investment expenditure. “The global financial crisis was coupled with a low dollar exchange rate, which could cause a decline in the value of proceeds,” said Souri. On the possibility that the oil price decreases could have impact over the Iraqi budget, he pointed out that this would generally cause a decline in Iraq ‘s financial yields from oil exports, and in turn would cut public spending. “The government needs to adopt a wise police of trimming operational, not investment, expenditure,” he stressed. Souri indicated that the finance ministry has to endorse its budget on the basis of the lowest expected prices for oil in order to preserve it from any cuts downs that could cause discrepancies. “The ministry might calculate its budget, for instance, on the basis of $50 per oil barrel,” Souri suggested. He noted that the Iraqi finance ministry is capable of dealing with any imbalance that might arise if the oil barrel rate went down below $80 through a budget surplus of $70 million. “This sum could be channeled to compensate low oil proceeds if oil prices continued to go down,” he added. AmR (S) 1